Highlights

- The TDCI in U.S. dollars surged 8.1% last week, reaching its highest level since early January. The increase was driven largely by an 11% rise in energy prices and an 8% jump in base metals prices. Due to a strengthening loonie, the index in Canadian dollar terms was up by a more modest 5.2% and sits at a 1-month high.

- Crude oil prices hit a 6-month high of US$58 per barrel last week, prompted by better-than-expected economic data reported in the U.S. However, the fundamental picture suggests that the recent run-up in prices has been overdone, as inventories remain elevated and demand is still contracting. As such, prices have lost some ground this morning as markets refocus on the fundamentals.

- Halting a 5-week slide, natural gas prices surged 15% last week, settling back above the US$4 per MMBtu mark on Friday. Much of the gains were driven by technical buying and speculation that the massive reductions in active rig counts will slow production. Nonetheless, short-term fundamentals remain weak, with U.S. storage levels 23% ahead of the 5-year average, and demand unlikely to pickup anytime soon.

- Base metals prices were up across the board, led by a 12% gain in nickel and zinc prices. Like energy prices, metals prices are rising on optimism that the global recession is easing. Furthermore, a rise in manufacturing activity in China has triggered speculation that Chinese demand for metals will pick up. A drop in LME inventories also provided support to prices.

- The 8% weekly drop in hog prices masks the uptrend seen during the second half of the week. Indeed, prices rose from US$55 to just under US$60 by Friday on expectations that the impact from the H1N1 flu on the pork market will begin to ease, leading to a recovery in exports.

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