Commodities Rebound From 16-Year Low as Oil, Metals Lead Gains

Updated on
  • Bloomberg Commodity Index climbs after 2.2% drop on Monday
  • Resources stocks outside China recoup losses after selloff

A conveyor belt deposits processed rock ore onto a dump at the Kibali gold mine in the Democratic Republic of Congo.

Photographer: Simon Dawson/Bloomberg

Flush from a collapse in everything from oil to aluminum to cotton, commodity bears are taking a break.

A measure of returns from 22 raw materials advanced on Tuesday, recovering from the lowest level since 1999 on concern a slowing Chinese economy will exacerbate supply gluts. Shares in miners and explorers outside China including Glencore Plc, Fortescue Metals Group Ltd. and Antofagasta Plc recouped some losses after a selloff that wiped $2.7 trillion from global equity markets.

“Short-term stabilization is possible but that doesn’t mean it cannot fall
further,” Dominic Schnider, head of commodities and Asia-Pacific foreign exchange at UBS Group AG’s wealth-management unit in Hong Kong, said by phone. “The headwinds are still there.”

Raw materials have plunged as supplies outstrip demand amid forecasts for the slowest Chinese growth since 1990. Risk appetite returned on Tuesday as China’s central bank cut its benchmark lending rate for the fifth time since November and lowered the amount of cash banks must set aside.

Oil futures gained as much as 4.3 percent in New York, rebounding after a 5.5 percent drop on Monday. Brent, which tumbled below $45 a barrel for the first time in six years, was 2.4 percent higher. Copper and aluminum rose more than 1 percent, advancing from the lowest close since 2009 on Monday.

Equities markets outside China recovered some ground, with benchmark stock indexes rising from the U.S. to Hong Kong and Germany. Glencore added 3.3 percent in London, while Antofagasta jumped 6 percent. BHP Billiton Ltd. increased 3.4 percent in London. Fortescue surged 11 percent in Australian trading after sliding 15 percent on Monday.

Commodities remain under pressure amid speculation that a steep correction in China’s stock market may signal deeper problems for the nation’s economy. The Shanghai Composite Index slumped for a fourth day, extending the steepest four-day rout since 1996 on concern the government is abandoning market-support measures.

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. It was 0.5 percent higher at 10:04 a.m. in New York after sliding 2.2 percent in the previous session. A separate gauge that only reflects the change in prices fell 2.2 percent to the lowest since 2009 on Monday.

Gold futures slid for a second day in New York as the rally in equities hurt demand for haven assets.