- Commodity gauge rises from 16-year low as dollar gains capped
- Senior Fed official says September U.S. rate increase in doubt
The case for a rebound in commodities from the lowest level in 16 years is getting a little help from central banks.
A Bloomberg gauge that tracks returns from 22 raw materials rose as much as 1.5 percent, a day after a senior Federal Reserve official cast doubt over a September increase in U.S. interest rates, capping gains in the dollar that have limited the appeal of commodities. China’s central bank on Tuesday cut borrowing costs for the fifth time since November in a bid to assure investors and support the economy in the world’s biggest user of energy, metals and grains.
Commodities plunged to the lowest level since 1999 this week on concern a glut in everything from oil to copper will be exacerbated as the Chinese economy grows at the slowest pace in more than two decades. While the oversupply remains, central bank efforts to calm markets roiled since the surprise devaluation of the yuan earlier this month are giving commodity bulls some relief.
“While it’s still early to say that there will be a strong rebound, the market is stabilizing a bit after comments on the possible delay of the U.S. rate hike and the Chinese central bank’s moves,” Hong Sung Ki, senior analyst at Samsung Futures Inc., said by phone from Seoul. “The commodities market is likely to see a lot of volatility in coming days as the focus remains on China.”
The Bloomberg Commodity Index was 1.4 percent higher at 86.3519 by 3:57 p.m. Singapore time, after closing at the lowest level since August 1999 on Wednesday. It’s a measure of returns that takes into account the loss or gain from holding futures contracts as well as the performance of the underlying raw materials. A separate gauge that only reflects the change in prices fell 1.3 percent on Wednesday to the lowest since 2009.
Oil futures in New York and London jumped at least 4.3 percent. Shares in resources companies were among the biggest gainers in both Asia and Europe. Chinese explorer Cnooc Ltd. soared 14.4 percent and PetroChina Co. advanced 4.1 percent in Hong Kong. BP Plc added as much as 2.4 percent in London.
Copper led industrial metals higher, rising 1.6 percent to $5,011.50 a metric ton on the London Metal Exchange. Aluminum advanced 1.6 percent and nickel was 1.8 percent higher. Glencore Plc, the world’s leading commodities trader, gained 2.9 percent and BHP Billiton Ltd., the biggest mining company, added 3.7 percent in London.
Gold futures in New York rose 0.1 percent to $1,126.20 an ounce as a weaker U.S. dollar increased the commodity’s appeal as a store of value. Federal Reserve Bank of New York President William C. Dudley said the case for raising interest rates in September is less compelling amid the recent market turmoil. About $8 trillion in market value has been erased from share markets worldwide since China’s central bank began devaluing the yuan on Aug. 11.
“The market will put a lot of pressure on China to come up with additional measures to stabilize the economy,” Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone in Seoul. “Prices of commodities have hit bottom and are likely to stay in this range for a while.”