Speak with an Adviser today Call Now +353 1 513 4599

    COMMODITY MARKETS

    Performance

    Recent Performance
    Commodity Assets Rebound
    Performance

    RECENT PERFORMANCE

    LONDON, April 19 (Reuters) Commodities revenue of the highest 10 investment banks increased 26 per cent from January to March, the initial gain in first quarter turnover since 2017, as a result of higher U.S. power and gas turnover, including more robust investor interest, a consultancy reported. Revenue from commodities for the top banks in the first quarter increased to $1.8 billion from $1.4 billion during the same period last year, London based financial industry analytics company Coalition reported on Thursday. It signified the first year on year climb in the first quarter since 2017, when revenue drastically increased to $3.3 billion from $1.4 billion in the same period in the previous year 2016.

    Partially, the present year's advances were due to the energy sector, Coalition stated. "The cold winter in North America created volatility and had a positive impact on U.S. power and gas revenues," it further stated. "Additionally, investor product performance recovered from a very low base as client activity levels showed some improvement."

    Commodities have been the highest performing asset type so far last year and investors have chosen the sector to offer diversification in portfolios as it produces more sensitivity to supply demand essentials and less to macroeconomic forces. The 19 commodity Thomson Reuters/Core Commodity CRB index increased to 9.4 per cent last year after shedding 5 per cent in 2017.

    Commodity Assets Rebound

    The resurgence of investor confidence in the asset type was also seen in data collected by Citibank, showing commodity linked assets under management (AUM) increased 10.25 per cent in the first quarter to $394 billion. While the amount is way below the recent high figure of $555 billion in April 2011, the climb is substantial, analyst Aakash Doshi stated. "The across the board first quarter increase in market valuation of index, ETP (exchange traded products) and actively managed investments totalling $37 billion does confirm the sharp turnaround for commodities last year after shedding 22 per cent in AUM during 2017," he noted. Many investors had avoided commodities in previous years because of poor performance and also because the sector was impacted by macroeconomic activities, moving along with other assets.

    With global economy recovering, commodities have proceeded along with their own pace, affected more by supply demand fundamentals and once more incorporating variety into portfolios. Investment banks in Wall Street often do not break down their commodity revenue, choosing to refer to it as within the wider fixed income, currency and commodities (FICC) classification. Commodities were the lone sub sector posting a rise within FICC, but it was not sufficient to prevent FICC revenues from dipping 16 per cent to $22 billion, Coalition reported. Banks' commodities revenue had been continually decreasing in recent years as some institutions diminished investments and others closed commodities units, affected by more stringent legal regulation and steeper capital stipulations after the worldwide financial meltdown. The top banks' commodities revenue amounted to $4.5 billion last year, below a third of the $14.1 billion they attained back in 2008 at the peak of the commodities explosion.

    British bank Barclays became the newest financial institution to exit last month, when it divulged its plan to stop most of its commodities trading operations. JPMorgan Chase has divested its physical commodities group, while Deutsche Bank all but left commodities trading last year.

    Coalition monitors the following banks:

    • Bank of America Merrill Lynch
    • Barclays
    • Citigroup
    • BNP Paribas
    • Credit Suisse
    • Deutsche Bank
    • JPMorgan Chase
    • Goldman Sachs
    • Morgan Stanley and
    • UBS

    Performance

    In the first half of 2017, the UK undertook its second quantitative easing plan, effectively printing money to purchase debt and support the market. This produced a robust growth in the first quarter and the first half of second quarter with commodities included in the best performing asset types and metals accounting for a big slice of those advances. From January’s low points to April’s high points, gold and silver recovered 21% and 89%, correspondingly.

    FREE CONSULTATION
    NEWS

    FINANCIAL TOOL

    LIVE QUOTES