Monthly Market Insights, Review of October 2021

Nicholas Boyd-Mathews

Eden Asset Management

Following a weak September, equities performed strongly during October with the S&P 500 up 6.9% for the month, the Dow Jones gaining 5.8%, the FTSE 100 up by 2.1% whilst the ASX 200 was flat.

Major news flow during the month covered:

  • the strong start to the US Q3 earnings season (with more than 80% of companies surpassing earnings expectations), 
  • Congress delaying the debt ceiling deadline until December, progress on Biden’s infrastructure spending proposals, 
  • labour shortages (with wages increasing by 5.5% year-on-year), 
  • the falling unemployment rate to 4.8%, and 
  • US GDP growth of 2.0% YoY for Q3 (driven by negative effects from Hurricane Ida and persistent supply-side distortions).

After having grown at 7.9% YoY in 2Q, China’s real GDP growth decelerated in Q3 to 4.9% YoY. Concerns regarding China’s property sector eased as stressed corporates delivered on interest payments that were missed last month.

It is apparent that countries are now looking forward to the next phase of growth, spurred by rising vaccination rates and the gradual reopening of economies. Supply chain and logistics issues remain an ongoing concern.

Climate change and ESG factors have been prevalent in the lead up to the UN Climate Change Conference (COP26), which is taking place during the month. We note the renewed global focus on clean energy and the transition to a sustainable and low carbon future within government mandates, with several countries outlining new policies/targets.

Source: Refinitiv, S&P Global Market Intelligence, JPM

Market Metrics for October vs YTD

Commodity highlights

The S&P GSCI rose 5.8% in October, following an increase of 6.0% in September, and is now up by 46.3% for the YTD.

Performance was solid across sectors, with energy-related commodities continuing to outperform, and additionally grains and metals regaining some of their recent weakness.

The combination of strong demand coupled with supply constraints moved energy prices to record highs in recent months, which remains a key driver for commodity markets, together with associated carbon emission costs.

During the month, Brent increased by 7.5% to US$84.4/bbl, iron ore (62% fines) gained 1.3% to US$121.2/t, base metals rallied: copper +9.7%, nickel +9.0%, lead +14.1% and zinc +15.8%, gold increased by 1.6% to US$1,783.0/oz and silver gained 7.4% to US$23.9/oz. Agricultural markets were mixed, with wheat and cotton outperforming.

S&P GSCI and Constituents, Monthly Returns

Source: Refinitiv

S&P GSCI Performance, LTM

Source: Refinitiv

Precious Metals – Gold, silver, palladium, platinum

The gold price increased by 1.6% to US$1,783.0/oz during October, following a decline of 3.3% over the month of September.

According to the World Gold Council (WGC), global demand for gold fell in Q3, to its lowest since Q4 2020, as financial investors sold the metal, with the numbers outlining the continuing impact of the coronavirus pandemic on demand. Total demand for gold over July-September was 831t, down from 894.4t in the same period of last year, and 1,084.9t in Q3 2019. Central banks paused purchases as the virus spread, with store closures and job losses causing jewellery sales to plunge, particularly in Asia. However, India's gold demand increased 47% YoY in the July-September quarter to 139.1t

Silver gained 7.4% to US$23.9/oz and is now down 9.5% for the YTD. 

The palladium price increased by 4.8% during the month to US$2,005.1/oz, down 18.2% for the YTD.

The platinum price increased by 5.6% during the month to US$1,022.4/oz, down 4.5% for the YTD.

Source: Refinitiv, S&P Global Market Intelligence, World Gold Council

Source: Refinitiv

Base Metals – Copper, nickel, lead, zinc

Base metals prices rallied during October (following a weak performance in September):

  • Copper: +9.7% to US$9,808.5/t;
  • Nickel: +9.0% to US$19,556.0/t;
  • Lead: +14.1% to US$2,419.0/t; and
  • Zinc: +15.8% to US$3,447.3/t.

Global copper smelting activity extended its recovery in October while nickel production edged higher despite sharp falls in China due to a power crunch.

Chile's Codelco, the world's largest copper miner, saw output in September decline by 16% YoY to 133,800t, while BHP Group's (ASX: BHP) Escondida, the world's largest copper mine, saw production drop 12.2% YoY to 82,600t.

Copper inventories have shrunk more than 90% in the past two months in LME-monitored warehouses.

Source: Refinitiv, S&P Global Market Intelligence, AFR

Source: Refinitiv

The S&P GSCI Aluminum cooled off by 4.9% during the month, however, aluminium has demonstrated a subsector-best 34.4% YTD performance.

Zinc and lead prices surged after major smelters around the world cut output on the back of higher power and carbon emission costs.

Source: Refinitiv

Bulks – iron ore, metallurgical coal

The iron ore price (NYMEX 62% fines) gained 1.3% to US$121.2/t during October, with a short-term rebound in prices again cooling off on 12 October.

The short-term increase in prices was driven partly by restocking inventories in China around its week-long National Day holiday period.

Prices were however negatively impacted towards the end of the month, as a result of weak demand due to the impacts of power cuts in manufacturing and the property/infrastructure slowdown.

Beijing's blue-sky policy (curtailing steelmaking to aid in easing air pollution) ahead of the Winter Olympics early next year is expected to prolong volatility in the iron ore market.

Source: Refinitiv

Late in October, it was reported that Chinese coking coal futures dropped to a near two-month low, as Beijing ramped up measures to cool surging prices. Policy intervention in coal prices intensified, and exchanges tightened trading rules for relevant products.

Chinese coking coal supplies remained tight as imports from countries such as Mongolia were hit by the pandemic situation. During the month, China commenced clearing Australian coal that was discharged at Chinese ports before an informal ban took effect in October 2020. Argus estimates that this will release an estimated 4-5Mt of Australian coking coal.

Source: Refinitiv, S&P Global Market Intelligence, AFR, Argus

Energy – Oil & gas

Natural gas prices in Europe and coal prices in China both lost some of their lustre in October, with countries intervening after record price spikes in September.

The combination of strong demand combined with supply constraints moved energy prices to record highs and remains a key concern.

Natural gas prices had surged in Europe, however, Russian President Vladimir Putin stated his support to increase gas supply to Europe to potentially aid in the energy supply constraints – the S&P GSCI Natural Gas fell 10.0% during the month.

The S&P GSCI Petroleum continued higher by 9.7%.

Delayed production increases, strong global demand, and logistics issues combined to impact global energy markets during October.

Brent increased by 7.5% to US$84.4/bbl for the month.

Source: Refinitiv

OPEC+ members are set to meet early next month to discuss the course of action for December, where output is expected to increase by 400,000 b/d, according to a July agreement. OPEC+ has been ramping up production by 400,000 b/d per month since August, increments that will reach 2 million b/d by the end of the year.

The coalition is under pressure from the U.S, Japan and India to further ramp up its output to temper oil prices that have surged amid a global gas crisis, outages and a lack of oil investments due to climate change pledges.

Source: Reuters, S&P Market Intelligence

Snapshot: S&P’s Big Picture 2022 Metals and Mining Industry Outlook

S&P expects medium-term supply constraints are setting the stage for historically above-average prices through to 2025 – driven mostly by increasing demand for materials used in the accelerating global energy transition.

The supply constraints are expected to persist despite intensive exploration efforts, which S&P forecast to expand further in 2022. Exploration is expected to continue to focus on regions that have largely mitigated the pandemic's impacts; however, few of the resulting discoveries will be developed in time to meet medium-term supply requirements. Faced with persistent if moderating demand, the industry is set up for a period of sustained growth.

Source: S&P Global Market Intelligence


Most commodities within the agriculture space increased in October, with the S&P GSCI Agriculture ending the month 3.6% higher.

Source: Refinitiv

S&P GSCI Kansas Wheat gained 7.4% for the month. Strong import demand, poor spring wheat harvests, and an export duty imposed by Russia heightened expectations of relatively tight global wheat supplies this season.

For the second consecutive month, S&P GSCI Cotton was the best performer in the agriculture complex, rallying 8.6%. The rally has been fueled by optimist estimates of demand, as consumers emerge from COVID-19 restrictions, while the overall harvesting pace for the U.S. crop has been slowed by various forms of weather adversities and maturation rates. 

The S&P GSCI Livestock fell 1.5% in October, with lean hog prices tumbling. Hog supplies in the U.S. continue to greatly outpace demand U.S. pork exports to China have fallen for the last three months, while record pork prices in the domestic market are having a negative impact on per capita consumption.

Source: S&P Global Market Intelligence

Selected S&P GSCI agriculture product returns relative performance (October 2021) 

Source: Refinitiv

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Nicholas Boyd-Mathews
Chief Investment Officer
Eden Asset Management

Nicholas is the Co-founder and Chief Investment Officer of the Eden Global Natural Resources UCITS Fund, which is classified as an ESG ‘Light Green’ Fund under Article 8 of the EU Sustainable Finance Disclosure Regulation (“SFDR”).

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