Commodities tumbled the most since November as industrial metals fell to the lowest in almost six years and crude oil had the biggest decline in five months after mounting turmoil in China and Greece eroded prospects for demand.
The Bloomberg Commodity Index of 22 raw materials fell 2.7 percent to close at 99.11, the biggest drop since Nov. 28. The London Metal Exchange’s gauge of six prices dropped 2 percent to 2,558.3, the lowest since July 21, 2009. West Texas Intermediate plunged 7.7 percent, the most since Feb. 4.
U.S.-traded Chinese stocks plummeted the most in four years as the government’s latest support measures failed to stem the rout in mainland equity markets. Greek Prime Minister Alexis Tsipras was given hours to come up with a plan to keep his country in the euro and stave off economic disaster.
“Investors will be thinking ‘safety first,’ ” following developments in China and Greece, Ric Spooner, a chief analyst at CMC Markets in Sydney, said in a note.
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. China, the world’s top consumer of energy and metals, suspended initial public offerings and brokerages pledged to buy shares in measures aimed at halting the steepest three-week stock plunge since 1992.
The Bloomberg commodity gauge has dropped 5 percent this year. The dollar has climbed 5.2 percent against a basket of 10 major currencies.
On the LME, copper for delivery in three months plunged 2.9 percent to settle at $5,590 a metric ton ($2.54) a pound), the biggest decline since Jan. 14. Nickel fell 2.5 percent to $11,700 a ton.
“The China risk now looks to be becoming a bigger issue than Greece” Will Yun, commodity analyst at Hyundai Futures Corp. in Seoul, said in a telephone interview. “The issue is the stock bubble on top of cooling demand.”
WTI futures for August delivery fell $4.40 to $52.53 a barrel on the New York Mercantile Exchange. U.S. gasoline and heating oil also slumped.
“We’re getting our summer correction and I don’t know where it will stop,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said in a telephone interview. “We could soon be looking at a $50-a-barrel ceiling.”
Spot gold rose 0.1 percent to $1,170.38 an ounce at 4:53 p.m. New York time. The price pared late gains of as much as 0.6 percent after falling as much as 0.5 percent. 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, said in a report.