Oil leads widespread commodity sell-off
By Ruona Agbroko
Brent crude led the fall in commodities markets, which were hit by worries about the deepening eurozone crisis and the impact on European growth.
ICE September Brent fell almost $4 a barrel to $102.94 on Monday after concerns heightened over the Spanish economy and reports that the IMF would not offer further funding to Greece.
Marex Spectron, the commodities broker, said gloom was unavoidable given the statements surrounding the European situation. The weekend statements concerning Spain, Greece and worries about Chinese growth had “added to the risk-off scenario that was already building”, it said.
Industrial metals were also weaker, with copper at a one-month low over fears of flagging demand in China – the world’s largest consumer of the red metal. Copper for three-month delivery on the London Metal Exchange lost 2.4 per cent to $7,392.50 a tonne.
Leon Westgate, analyst at Standard Bank, said comments from a Chinese central bank adviser suggesting Chinese GDP for the third quarter may slip further from 7.6 per cent in the second quarter to 7.4 per cent had unnerved the market.
Other industrial metals were also weaker, with nickel, used in stainless steel, hitting a three-year low of $15,586 a tonne and tin at a ten-month low of $18,449 a tonne.
Grains and oilseeds, which last week reached record highs because of declining crop conditions amid the worst drought in the US for half a century, declined as risk averse investors and traders sold off their positions.
CBOT September corn lost 3 per cent to $8 a bushel while benchmark soyabeans declined 2.4 per cent to $17.15¼ a bushel.
Gold was sold in line with other commodities and financial markets. The yellow metal, which fell almost 1 per cent to $1,570 a troy ounce on Monday, has moved within a narrow range over the past few weeks.
However, Edel Tully, precious metal strategist at UBS, said concerns about potential rising food inflation could be the catalyst to spark gold buying in some emerging market countries.
“Rising food prices are relevant for gold to the extent that it feeds into CPI prints, particularly in countries that have an affiliation with gold,” she said.
Food commodities and their weightings in emerging market inflation baskets are substantial, accounting for about 30 per cent of China’s inflation, almost 50 per cent in India and 33 per cent for Thailand. |
