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Late Equity Roundup: Mildly Lower on Week

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COMMODITIES
  • Even though growth expectations have been fading globally due to the Covid uncertainty (particularly in China) and the deceleration in global liquidity, supply tightness in the commodity market combined with elevated inflationary pressures could support commodity prices in the medium term.
  • In addition, the aggressive tightening cycle from EM central banks in 2021 (expected to continue in H1 2022) could mark a USD pause and therefore support EM currencies and risky assets, which have been trading at ‘distressed’ levels in some economies.
  • The chart below shows the strong divergence between raw industrial commodities and EM equities in 2021.
  • As the two times series have co-moved strongly over time, investors were questioning last year if the momentum on industrial metals could continue in 2022 as the global economy continues to decelerate and liquidity starts to dry up.
  • Commodities are still very cheap relative to equities looking at a historical 50-year range, therefore some commodity sectors could continue to outperform equities this year.

Source: Bloomberg/MNI

MNI London Bureau | +44 203-865-3850 | yvan.berthoux@marketnews.com
MNI London Bureau | +44 203-865-3850 | yvan.berthoux@marketnews.com

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