A measure of returns from commodities sank to its lowest since 1999 and shares in resource companies tumbled by the most since the financial crisis on concern that a slowing Chinese economy will exacerbate supply gluts.
The Bloomberg Commodity Index of 22 raw materials from oil to metals lost 2.2 percent to end the day at 85.8531, the lowest closing since August 1999. Shares in miners and explorers including Glencore Plc, BHP Billiton Ltd. and Exxon Mobil Corp. tumbled while Brent crude fell below $45 a barrel for the first time since 2009.
“Sentiment is extremely negative across the commodity complex,” Mark Keenan, head of commodities research for Asia at Societe Generale SA in Singapore, said in an e-mail. “Markets are plagued by concerns of oversupply.”
Raw materials are in retreat as supplies outstrip demand amid forecasts for the slowest Chinese growth since 1990. The largest user of energy, grains and metals was much weaker than anyone expected in the first half of the year, according to Ivan Glasenberg, head of Glencore, the world’s leading commodity trader.
The Bloomberg Commodity Index is a measure of returns that takes into account the loss or gain from holding futures contracts as well as the performance of the underlying commodities. A separate gauge that only reflects the change in prices fell 2.2 percent to the lowest since 2009.
“It’s being fueled by the large drop in the Chinese stock market today, which is making people nervous about the management of the Chinese economy, which has direct implications for commodities,” Ric Spooner, a chief market strategist at CMC Markets Asia Pty, said by phone from Sydney. “It’s now basically a risk-off move.”
The 19-member Stoxx Europe 600 Basic Resources Index had its biggest one-day drop since December 2008, with Glencore falling 13 percent to a record low. The Standard & Poor’s 500 Energy Index tumbled 5.2 percent to the lowest level since October 2011, erasing $17 billion in value.
Oil has sunk as producers maintain or boost supply even as a glut persists, prioritizing sales over price. Iran will raise output at any cost to defend its market share, Oil Minister Bijan Namdar Zanganeh told his ministry’s news website, Shana.
Brent for October settlement declined 6.1 percent to $42.69 a barrel on the ICE Futures Europe exchange, the lowest close price since March 2009. West Texas Intermediate in New York dropped 5.5 percent, taking its loss over the past year to 59 percent.
Copper on the London Metal Exchange lost 2.1 percent to settle at $4,951 a metric ton, after touching $4,855, the lowest since July 2009. The metal is regarded as an indicator of global economic activity. Output topped demand by 151,000 tons in the six months through June, according to the World Bureau of Metal Statistics.
While there’s speculation that market turmoil may prompt the Federal Reserve to delay an increase in interest rates, the dollar has strengthened over the past year. That makes commodities more expensive for holders of other currencies.
Agricultural commodities weren’t spared in the rout, with soybeans, coffee and cotton dropping.
“It’s always very difficult to call a bottom, and it’s a commodity-by-commodity analysis that’s required,” Graham Kerr, chief executive officer of South32 Ltd., the Perth-based mining company hived off by BHP, said in an interview on Bloomberg Television. “We are planning for a couple of hard years.”