Metals and oil prices have been hit by the climbing dollar at a time when global demand is falling
Copper fell below $4,500 a metric ton for the first time in six years and nickel touched the lowest in more than a decade on concern producers aren’t doing enough to trim a glut of metal. The London Metal Exchange’s index of six industrial metals is having its worst year since the global financial crisis in 2008. Bloomberg’s index of commodities has tumbled about 23 percent in 2015, dragged down to the lowest level since 1999 by slowing demand in China and a stronger dollar.
Expectations that the Federal Reserve will soon raise U.S. interest rates have boosted the dollar and made metals more expensive for buyers holding other currencies. At the same time, that’s lowering production costs of companies outside the U.S. and encouraging them to maintain output, according to T-Commodity, a Milan-based consultancy.
“Demand is still the key for commodities at the moment, and supply discipline and production cuts are uncertain,” said Helen Lau, analyst at Argonaut Securities in Hong Kong. “There’s a chance that local producers will continue to ramp up production and replace the cuts that have been made.”
Copper lost 2 percent. West Texas Intermediate crude futures fell 0.5 percent to $41.69 a barrel at 2:41 p.m. New York time, after rallying as much as 2 percent earlier. The Standard & Poor’s 500 Index fell 0.3 percent after the gauge had its biggest weekly jump of the year. European and U.S. government bonds fell amid a flurry of supply scheduled for this week. The Bloomberg Dollar Spot Index added 0.2 percent.
Crude in New York swung between gains and losses following a report by the Saudi Press Agency on the scope for cooperation on prices. Barclays Plc said that didn’t reflect any policy shift by the biggest member of the Organization of Petroleum Exporting Countries, which is due to meet Dec. 4.
“The Saudi statement doesn’t signal a policy shift, but there are so many short positions out there, which is making the market very sensitive,” Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital LLC in Miami, said by phone. “The market is on pins and needles.”
Agricultural commodities face a new headwind after Sunday’s election of Mauricio Macri as Argentina’s president, which may unleash an estimated $8 billion in shipments of stored crops.
Gold for immediate delivery was down 0.9 percent at $1,068.26 an ounce. Assets in exchange-traded products backed by gold have fallen to the lowest since 2009. Money managers are holding a net-short position in the metal for first time since August as their long wagers shrunk to the smallest in seven years. Zinc lost 2.9 percent, giving up gains made on Friday after Chinese smelters announced plans to cut production.
Stocks
The S&P 500 lost 0.3 percent to 2,082.50. The main U.S. equity gauge surged last week after Federal Reserve officials signaled the economy is strong enough to withstand the first rate increase since 2006, and investors grew more comfortable with the notion that borrowing costs may soon be higher. Stocks have gained in seven of the past eight weeks, boosted by raw-material, industrial and technology shares, taking the S&P 500 to within 2 percent of a record set in May.
Tyson Foods Inc. gained 9.7 percent after boosting its dividend and its profit outlook was better than some analysts expected. Pfizer Inc. fell 2.3 percent after announcing a $160 billion merger with Allergan Plc.
The Stoxx Europe 600 Index fell 0.4 percent and the MSCI Asia Pacific excluding Japan Index retreated 0.3 percent, with materials shares losing 0.7 percent. BHP Billiton declined 2.1 percent.
RWE AG declined 5 percent after a report that its chief executive officer is having trouble finding funding for growth. Credit Suisse Group AG dropped 2.9 percent after completing a share placement for 1.32 billion francs ($1.3 billion).
Currencies
Russia’s ruble weakened 1.9 percent and New Zealand’s dollar lost 0.8 percent. A Bloomberg gauge of 20 developing-nation currencies declined for the first time in five days, falling 0.6 percent.
“Emerging markets are under pressure as U.S. raising interest rates in December is a done deal,” said Kenix Lai, a foreign-exchange analyst at Bank of East Asia Ltd. in Hong Kong. “The dollar will get stronger while China’s economic fundamentals haven’t shown any signs of improvement.”
The euro earlier sank to a seven-month low of $1.0601 after European Central Bank chief Mario Draghi said Friday that he and his fellow bank officials “will do what we must” to boost price growth.
Emerging Markets
The MSCI Emerging Markets Index dropped 0.4 percent after the biggest weekly gain in more than a month.
The Hang Seng China Enterprises Index fell for the first time in three days, sliding 0.7 percent. Guotai Junan International Holdings Ltd. tumbled 12 percent after the brokerage said its chairman and chief executive officer can’t be contacted.
The Shanghai Composite Index declined 0.6 percent after regulators gave the green light to initial public offerings following a five-month freeze. The China Securities Regulatory Commission has restarted IPOs for five companies to list on the Shanghai stock exchange and five in Shenzhen, according to a statement on its official microblog on Friday.
Bonds
Yields on 10-year Treasuries fell two basis points to 2.24 percent. Two-year yields held close to a five-year high as the U.S. government sold $26 billion of the maturity while speculation mounts that the Fed is poised to raise interest rates.
The likelihood of higher Fed rates by year-end is 74 percent, futures show. That’s the highest since August and up from 50 percent at the end of October. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.
Government bonds across the euro-area fell at the start of a week of auctions. The yield on Germany’s 10-year bund jumped five basis points to 0.53 percent. Italy’s 10-year rose three basis points to 1.52 percent. Belgium started the glut with sales of 2025 and 2028 securities Monday that saw borrowing costs decline from previous auctions.
