In London on Friday the Financial Times was reporting that commodities, though down over the week, had shown some resilience.
A few hours in New York it was clear that apart from oil (which eased a touch only) commodities were much weaker than thought.
For example LME copper prices eased $US87 a tonne to $US6013 a tonne, a fall of 1.4 per cent. Several hours later in New York the price closed down 2.56 per cent at $US2.63 a lb, a loss of 7USc a lb.
Gold closed down sharply around $US648 an ounce in London, and was off more in New York at $US644 an ounce, a loss of 3.1 per cent.
Traders said that what was notable was the way the instability in stocks fed into other markets (with US bonds the only one benefiting as prices on bonds rose and yields fell sharply).
Much of the shuffling in equities and commodity markets was done by financial investors (AKA speculators, hedge funds and the like) who liquidated positions to generate cash and de-risk their books.
Copper prices in New York fell 5.2 per cent last week ending the February rally.
Gold fell 6.2 per cent last week, silver 12 per cent. Analysts said $US1.3 trillion in value was wiped from equity markets around the world and hundreds of billions more disappeared in commodity and other markets.
Bonds, not precious metals were the only safe haven for nervous investors.
Copper is being hurt by the withdrawal of speculative positions built up in the rally last month: as US copper consumption fell, dragging prices down in January Chinese buyers started picking up the cheaper priced metal, leading to a rush of money punting on a rise in Chinese consumption.
What many forget was that China withdrew from world copper markets in the last half of 2006 because prices were too expensive and ran down internal stocks.
When world prices fell sharply in early to mid January they emerged to being re-stocking and this some analysts confused for new demand rather than pent up new purchases.
According to a report from Merrill Lynch worldwide in 2006, mining companies boosted output to create a surplus of copper of 847,000 tons last year.
That’s a lot more than the surplus for the 11 months to November of more than 110,000 estimated by the International copper Council (that includes metals sourced from scrap).
Unlike late last year, LME copper stocks have only risen slightly so far this year: a total of 30,000 tonnes, with 1900 tonnes coming into the warehouses last week. Total LME copper stocks are now 207,300 tonnes of metal.
Zinc fell $US155, or 4.5 per cent, to $US3,320 a tonne in London, marking the biggest percentage drop in a month.
Lead slipped $US65, or 3.4 per cent, to $US1,855 in London and aluminum, tin and even nickel lost ground on Friday.
…………………………
Oil prices eased for the first time in eight days on Friday on those worries about the health of the US economy and the market worries.
But the price is still more influenced by market specific actions, such as the latest OPEC cuts starting and the weekly figures on US inventories of oil and oil products.
April delivery crude fell 36 Us to close at $US61.64 a barrel on the New York Mercantile Exchange. Oil is down 2.7 per cent from a year ago and rose 0.8 per cent last week.
OPEC says it expects world oil demand to average 85.37 million barrels a day this year, “broadly unchanged” from its previous estimate of 85.39 million. Consumption will be 1.24 million barrels a day, or 1.5 per cent, higher than in 2006.
And the prices of US agricultural commodities such as corn, wheat and soybeans all fell heavily last week on fears that the recent run up in prices will see cattle feedlotters process fewer animals in the US this year and worries that the rising price of corn might curtail demand from the ethanol industry.
