This week, following the US midterm elections, stocks, crude oil, and gasoline fell, while precious metals rose significantly. Although there were moments when US stocks rose immediately after the election, looking at the week as a whole, all three major US indices fell, and in Japan and South Korea, indices with a higher weighting of AI and semiconductor-related stocks saw particularly notable declines. While US employment statistics and the ISM Manufacturing Index exceeded market expectations, long-term interest rates in both the US and Japan fell. Along with the rise in precious metals, we believe it is possible that funds shifted toward bonds and precious metals. The sharp drop in crude oil is believed to have been influenced by changes in policy toward Iran and expectations for a ceasefire. Meanwhile, although tanker freight rates for crude oil and petroleum products have been falling since October, they remain above their spring peaks.
Whether the expectations already priced into crude oil prices will lead to an actual recovery in transit and export volumes is the focus for assessing this week’s price movements.
Summary of this week
-
Stocks In the US, technology and energy were sluggish. In Japan, all sectors fell on Friday, and trading volume increased toward the weekend.
-
Interest Rates/Precious Metals Long-term interest rates in the US and Japan fell, and precious metals rose significantly. The dollar remained flat, and copper fell.
-
Energy Crude oil and gasoline fell significantly over the week. Crude oil has risen sharply over the last three months, and tanker freight rates remain at a high level.
-
Agricultural Commodities Slightly lower over the week. Major grains have been sluggish over the past few months, and ocean freight rates are also on a downward trend. Meanwhile, natural gas, a raw material for urea-based fertilizers, remains at a high level in Europe and Asia, and we are paying attention to producer profitability amid the continued decline in grain prices.
Current Outlook
-
Short-term (several weeks to several months)
This is a phase where the market is easily swayed by statements and policy responses regarding US diplomacy and domestic affairs after the election. Ceasefire expectations are a downward factor for crude oil, but if military tensions or transport disruptions reignite, crude oil and long-term interest rates could rise again, potentially prolonging the adjustment in stocks. -
Medium-term (about six months to one year)
We are tracking shipping transit and crude oil exports in the Middle East, as well as grain transport in the Black Sea. If transport normalizes, there is room for inflationary pressure to ease through energy and logistics costs. If supply constraints persist, fuel and fertilizer costs will squeeze the profitability of companies and farmers, and the gap in price-passing ability is likely to widen. -
Long-term (several years)
As seen in the protection of regional industries in Europe and the diversification of rare earth procurement sources, the review of supply chains by economic zone is progressing. If the diversification of procurement sources and transport routes also progresses in energy, supply stability will increase; however, procurement costs may rise due to longer transport distances and additional investment, which could also affect the level of resource prices.
※ This article is a personal record summarizing my own market observations and learning. It is not intended as investment advice.
