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June 11, 2015 - Weekly Pricing Pulse
The IHS Materials Price Index (MPI) bounced back last week, gaining 3.7% despite a sluggish trend in global asset markets and lackluster May purchasing managers' reports in big emerging market economies. Among the commodities showing increases were chemicals, rubber, pulp, and lumber. Lumber again stood out with a 5.3% increase as the sector continues to be supported by homebuilding activity.
The overall MPI is now very close to early May's peak and is just below its 2015 high posted during the first week of January. However, the index is still down more than 30% year on year. Interestingly, the exchange-traded MPI declined by 1% last week, perhaps reflecting the global bearish trend seen in financial markets.
The European Central Bank's muted and even indifferent reaction to recent bond market turmoil rattled yields further as 10-year bond rates spiked and the euro strengthened. Markets were further hampered by the Greek standoff and a postponed IMF repayment. Meanwhile, OPEC's meeting came out as expected with the production quota holding at 30 million barrels per day. Currently, OPEC is overshooting this target by 1 million barrels per day, and the glut in oil markets could get worse this summer as Iran will likely boost output by 0.6 million barrels per day should sanctions be lifted.