Commodity gauge hits lowest since 1999
A MEASURE of returns from commodities sank to its lowest since 1999 and shares in resource companies joined a global equity slump on concern that a slowing Chinese economy will exacerbate supply gluts.
The Bloomberg commodity index of 22 raw materials from oil to metals lost as much 2.2 percent to 85.8339 points, the lowest level since August 1999. Shares in mining companies and explorers from Glencore to BHP Billiton and Cnooc tumbled while Brent crude fell below $45 (R583) a barrel for the first time since 2009.
“Sentiment is extremely negative across the commodity complex,” Mark Keenan, the head of commodities research for Asia at Société Générale in Singapore, said.
“Markets are plagued by concerns of oversupply.”
Raw materials are in retreat as supplies outstrip demand amid forecasts for the slowest Chinese growth since 1990. The largest user of energy, grains and metals was much weaker than anyone expected in the first half of the year, according to Ivan Glasenberg, the head of Glencore, the world’s leading commodity trader.
The Bloomberg commodity index is a measure of returns that takes into account the loss or gain from holding futures contracts, as well as the performance of the underlying commodities. A separate gauge that only reflects the change in prices is down 1.6 percent to the lowest since 2009.
“It’s being fuelled by the large drop in the Chinese stock market… which is making people nervous about the management of the Chinese economy, which has direct implications for commodities,” Ric Spooner, a chief market strategist at CMC Markets Asia, said from Sydney. “It’s now basically a risk-off move.”
Glencore dropped as much as 7.6 percent to a record low of 146.45 (R29.7583) pence in London while Anglo American lost 6.6 percent. Shares in BHP Billiton, the world’s largest mining company, fell as much as 5.3 percent in Sydney to the lowest level since 2008.
Nanjing Iron & Steel led losses on the Shanghai composite index, sliding 10 percent as the gauge plunged the most since 2007. Chinese explorer
It was being fuelled by the large drop in the Chinese stock market yesterday…
Cnooc slumped 8.5 percent in Hong Kong.
Oil has sunk as producers maintain or boost supply even as a glut persists, prioritising sales over price. Iran would raise output at any cost to defend its market share, Oil Minister Bijan Namdar Zanganeh told his ministry’s news website, Shana.
Brent for October settlement declined as much as 4.8 percent to $43.28 a barrel on the ICE Futures Europe exchange, the lowest price since March 2009. West Texas Intermediate in New York dropped 4.4 percent, taking its loss over the past year to 58 percent.
Copper on the London Metal Exchange lost as much as 3 percent to $4 903 a ton, the lowest since 2009. The metal is regarded as an indicator of global economic activity. Out- put topped demand by 151 000 tons in the six months through June, according to the World Bureau of Metal Statistics.
While there’s speculation that market turmoil may prompt the Federal Reserve to delay an increase in interest rates, the dollar is still 16 percent higher over the past year. That makes commodities more expensive for holders of other currencies.
Agricultural commodities weren’t spared in the rout. Soya beans, wheat and maize extended losses in Chicago. – Bloomberg