What does Brexit mean for commodity markets?

As of 5AM

Gold +6%, silver +3%, copper -4%, Brent crude -6%, nickel -4%, corn -2%, cotton -2%

Given the shock of the outcome (markets were pricing in almost a 90% probability of the UK voting to stay in the EU before voting commenced) the reaction in the markets was much more extreme earlier in the night.

So what will Brexit mean for commodity markets for the rest of 2016?

In the short term markets everything depends on the words of politicians in the UK, Europe and elsewhere. Those campaigning to remain have used the fear of an adverse economic reaction in the short term to try to persuade UK voters to stay in the EU. Now that we know the outcome they will be trying to do everything they can to say smooth words about how things will not be as bad.

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Pigs might fly: Why China’s plan to reduce meat consumption is more than just about the environment

Last month the Chinese Nutrition Society called on consumers to reduce the amount of animal-based food they eat from about 300 grams to 200 grams a day and their meat consumption from about 62 kg to 27 kg per year.

The Beijing-backed health agency hopes the guidelines will help ward off a growing obesity and a diabetes time-bomb in China, while global warming campaigners believe they could also result in huge benefits for the planet.

But there is also a macroeconomic benefit too.

Pork prices are a serious matter in China, and is a significant driver of consumer inflation. Chinese consumer inflation is closely watched by authorities eager to maintain social stability and food security. For example, the “blue-ear pig” disease that forced Chinese farmers to slaughter millions of pigs in 2008 drove the country’s inflation rate to its highest level in a decade.

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Trade carefully: Commodity markets are in for a volatile week

As the EU referendum approaches markets of all shapes and sizes, including commodities are becoming increasingly driven by expectations of what the result will be. Commodity markets such as gold have become correlated with the implied probability based on the betting odds of the UK remaining in the EU. Putting aside the relative macroeconomic merits of Brexit to one side commodity market volatility is likely to remain high throughout this week.

We are now entering a period of no-mans land where there will be no published polls. Having said that many financial institutions have reportedly commissioned their own private surveys of voter intention to help them trade. But even these will not be on the same scale as the exit polls typically carried out on the day of the general election.

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