Tensions, fears of war may lead to even more expensive cars, bread

Commodities are trading at all-time highs, and that could have a wide-ranging impact on the price of everything from new cars to grilled cheese sandwiches. 

But it’s also happening beyond energy. Look at wheat and aluminium, for instance. Given that Russia and Ukraine combined make up a quarter of global grain exports, wheat and corn prices have risen on the possibility of a sudden supply crunch. It’s a similar story for aluminium, as Russia is a key producer of the metal.

The latest peak in the commodity spot index resembles the move ahead of the 2008 crash, as well as the 2011 food crisis, which was caused in part by a destroyed Russian grain crop.

The moves in these key Russian exports have far reaching consequences for US consumer prices. Whereas oil and LNG has been driving global inflation and largely hawkish pivots in monetary policy, wheat and aluminium will likely hit US shoppers particularly hard, spilling over into things like bread and cars. US CPI data measuring increases in the cost of new autos has mirrored the acceleration in aluminum prices. It’s a similar story with bread, which costs more as wheat prices climb.  Russia is a commodity-exporting nation, so any disruptions could have far-reaching consequences for US consumers.

Oil Heads for its Best January in 30 years (Bloomberg)

Oil markets opened the week higher and were heading for the biggest January gain in at least 30 years as robust demand outpaced fresh supply and Russia amassed troops near Ukraine.  The global crude benchmark rose 0.8 per cent, paring earlier gains, but remains on track for a 17 per cent gain this month.  West Texas Intermediate futures traded above $87 a barrel.  Traders on Monday were greeted with a familiar set of drivers, from the weather to stockpiles. Low temperatures in the US have been boosting demand for fuels, as Boston reported a daily snow record and New York’s Central Park saw more than 8 inches fall. Oil infrastructure in Ecuador was damaged by a rockslide, potentially endangering supply. Meanwhile, oil held on tankers fell by more than a fifth last week, the latest sign of ebbing inventories. That combination of booming demand, scratchy supply and dwindling stockpiles has helped crude soar this month, with top banks and oil firms saying prices may soon pass $100 a barrel.

Rouble hits one-week high vs dollar, pares last week’s loss (Reuters)

The rouble hit a one-week high against the dollar on Monday, paring last week's heavy losses after Moscow said it was ready to continue dialogue with the West over the Ukraine crisis. Intra-day, the rouble gained 0.6 per cent to 77.37 to the dollar after touching 77.2425, its strongest since January 24. The Russian currency sunk to a near 15-month low of 80.4125 last week, battered by rising tensions between Moscow and the West. “The geopolitical situation remains up in the air," said BCS Global Markets.