- Australia’s big miners have opened sharply lower after a selloff in global commodities overnight.
- Fears around contagion in emerging markets have cast doubt on the demand outlook.
- In addition, weak economic data out of China this week did little to ease the market’s concerns .
Commodity prices plunged across the board overnight, as fears of further contagion in emerging markets cast doubt on the demand outlook.
CBA commodities analyst Vivek Dhar cited the dual issues of Turkey’s financial crisis and US-China trade tensions as the main catalysts for the fall.
BHP is down more than 3% in early trade while Rio has lost around 2.7%, following a weak global lead after BHP’s London listing fell by more than 5%.
Base metals were hardest hit, as copper prices — often viewed as a barometer of global growth — fell by more than 3%.
The move saw copper prices dip below $US6,000 a tonne for the first time since May last year.
There were even heavier falls for zinc and nickel, while gold remains stuck in its recent malaise.
Although gold usually benefits from a risk-off tone on global markets, it’s also negatively correlated with the US dollar.
And safe-haven demand for gold has been more than outweighed by strength in the greenback, as the USD index briefly climbed to a 14-month high overnight.
Prices for the precious metal dipped further below $US1,200 an ounce overnight, falling to the lowest level since January 2017.
The recent gains in the greenback have put pressure on emerging market economies more broadly, many of which raise debt in US dollars.
Meanwhile, stocks in China fell sharply yesterday, and concerns about the Chinese economy also weighed on the commodities outlook.
“While China has looked to policy easing to support economic growth, activity data for July did little to give hope to the market,” Dhar said.
Industrial production and fixed asset investment figures both missed forecasts last month in China — a country which accounts for 40-60% of global metals consumption.
Elsewhere in the commodities complex, oil prices fell by more than 3% after weekly data showed US oil stockpiles rose by 6.81 million barrels, against a forecast decline of 2.9 million.
Prices for iron ore benchmark 62% fines fell by 0.7% to $US67.05 a tonne.
The Aussie dollar — despite being a commodity-linked currency with heavy exposure to China — managed to bounce off its lows overnight after it almost fell below US72 cents yesterday in Asian trade.
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