BB: Commodities Slide as China Measures, Greece Stoke Demand Concern
Oil, metals and grains slid as China’s attempts to halt a stock crash and Greece’s vote against further austerity shook confidence in global economic growth.
Raw-material prices tumbled the most since February after policy makers in Beijing took emergency measures over the weekend to shore up the country’s equities market and Greek voters endorsed Prime Minister Alexis Tsipras’s call for a “no” vote. The Bloomberg Commodity Index fell as much as 2.6 percent to two-week low of 99.2481, and was at 99.3358 by 12:29 p.m. in London.
Finance Minister Yanis Varoufakis quit hours after Greek voters rejected more spending cuts and tax increases, taking the country to the brink of financial failure and risking its exit from the euro. China, the world’s top energy, grains and metals consumer, suspended initial public offerings and brokerages pledged to buy shares in measures aimed at halting the steepest three-week stock plunge since 1992.
“Faced with a combination of the Greek ‘no’ vote, weakening commodity prices and nervousness about the possible spillover effects of plummeting Chinese markets, investors will be thinking safety first,” Ric Spooner, a chief analyst at CMC Markets in Sydney, wrote in an e-mailed note.
The Bloomberg commodity gauge is down 4.8 percent this year as Greece’s slide toward collapse and China’s slowing economy stoked speculation demand growth for raw materials would weaken.
Copper Leading
Copper fell as much as 4.2 percent on Monday as all six main metals on the London Metal Exchange dropped. Brent crude lost as much as 3.1 percent, sliding below $60 a barrel for the first time since mid-April. Wheat, corn and soybeans on the Chicago Board of Trade all fell at least 1.7 percent. The yield on 10-year Treasuries declined eight basis points.
The Shanghai Composite Index rose 2.4 percent on Monday, paring an earlier rally of as much as 7.8 percent. The index slumped 29 percent in the previous three weeks, posting $3.2 trillion of losses. The government is trying to prop up the country’s stock market, which was fueled by a record number of amateur investors to become the world’s second-largest.
“The China risk now looks to be becoming a bigger issue than Greece,” Will Yun, a commodities analysts at Hyundai Futures Corp., said by phone from Seoul. “The situation in China is a bit worrisome as the issue now is the stock bubble on top of cooling demand.”
Gold failed to sustain an earlier gain as the dollar strengthened against the euro, reducing the appeal of bullion as a store of value. The Bloomberg Dollar Spot Index climbed to the highest level in almost a month. Gold traders will focus on the dollar and the outlook for higher U.S. interest rates, said Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam.
“Gold’s deterioration is evidence of the market discounting wider contagion risk from a Greek default and increasing certainty of a U.S. rate hike this year,” Suki Cooper, an analyst at Barclays Plc in New York, wrote in a report e-mailed Monday.
