Commodity and equity markets are telling different stories.
On the one hand, share markets in Europe and the US recovered after Monday’s sell-off in Asia (including Australia).
Europe’s STOXX 600 index ended up 0.25% on the day while Wall Street saw moderate gains across the board. the Dow was up around 0.5%, the S&P 500 added nearly 0.7% and the Nasdaq was up 1.3%. But those gains were down on the near 1.6% to 2% losses on Friday.
But commodity markets were weaker and while some that weakness is down to the rise in the value of the greenback, it was China’s coronavirus crisis and the rising toll of dead and infected that undermined sentiment for yet another day.
Iron ore, oil, and copper prices again fell Monday. The Aussie dollar regained the 67 US cent market and then retreated as the greenback firmed to be trading around 66.88 in early Asian dealings – a new near-decade low.
Despite the recovery on Wall Street (not all of Friday’s losses though were regained) overnight trading Monday in ASX 200 futures has the local market opening weak with a gain of 3 points.
All eyes will again be watching what happens in China and watch the prices of local resource companies slide because of the falls in iron ore (7%), copper (0.4%) and oil (almost 3%).
The price of 62Fe iron ore delivered to northern China ended at $US80.38 a tonne, the lowest for several months and down 7% on the day and 15% so far in 2020. Chinese iron ore futures fell sharply, but some analysts expect a stabilising today.
Oil fell to new 13 month lows. West Texas Intermediate crude futures in the US slid into a bear market (a fall of 20% or more from the most recent peak) because of expectations of a slowdown in oil demand from China. US crude shed more than 16% in January alone.
March West Texas Intermediate oil fell $US1.45, or 2.8%, to settle at $US50.11 barrel. That was the lowest front-month contract finish since January 2019. It was also down from the most recent high of $US63.27 on January 6.
Brent crude slid April $US2.17, or 3.8%, to end at $US54.45 a barrel in Europe, its lowest settlement since December 31, 2018. The settlement level also marked the global benchmark’s entry into a bear market, down 21% from its recent high of $US69.02 from September 16.
Gold sold off as the US dollar rose (US bond yields kicked higher as well as the nervousness about China eased). Gold though did rise to within sight of the $US1,600 an ounce level before easing.
Comex gold futures for April delivery fell $US5.50, or 0.4%, to settle at $US1,582.40 an ounce. Prices had drifted up to an intraday peak near $US1,600, touching $US1,598.50, according to FactSet. That marked the highest intraday level since 2013.
Comex March silver shed 34.2 cents, or 1.9%, at $US17.67 an ounce, while Comex March copper edged down 0.4% to settle at $US2.507 a pound to be den 10.4% year to date and signalling the continuing unease in markets about the future health of the Chinese economy in the wake of the coronavirus crisis.
