Commodity Stocks Slide as Collapse in Raw Materials Deepens Painby
Bloomberg World Mining Index heads for fifth weekly decline
Investors increase bets Fed will boost rates in December
It’s another week to forget for many of the world’s commodities producers.
Copper smelters, oil explorers and iron ore miners tumbled in Asia following a collapse in returns from raw materials to the lowest in 16 years. The Bloomberg World Mining Index, a gauge of the world’s biggest producers, fell 5.7 percent in a fifth week of losses while a similar measure of energy shares was heading for the biggest drop since August.
Prices of everything from gold to oil to copper are getting hammered. The latest catalyst is mounting expectation the U.S. will raise interest rates in December, strengthening the dollar and cutting the appeal of raw materials. There are also fresh signs that government stimulus is doing little to stem the worst economic slowdown in a generation in China, the biggest consumer of energy, metals and grains.
“The real shift over the past week has been around the Fed and expectations for a rate rise, which has reinvigorated the strength in the U.S. dollar,” Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group in Sydney, said by phone. “China’s manufacturing figures pointed to further weakness in growth and we then had the credit data, which showed conditions are still fairly poor, exacerbating concerns around commodity demand.”
Australian iron ore miners BHP Billiton Ltd. and Rio Tinto Ltd. slid at least 1.7 percent in Sydney on Friday. BHP’s shares have tumbled 13 percent since Nov. 5 when its Brazilian iron-ore joint venture with Vale SA was devastated by mudslides caused by the rupture of dams. PetroChina Co., China’s biggest oil and gas producer, lost 3.7 percent in Hong Kong while Jiangxi Copper Co., its largest smelter, fell 3 percent.
Noble Group was among the worst hit among Asian commodity stocks. The trader tumbled to a one-month low in Singapore after reporting a slump in quarterly profit. Chief Executive Officer Yusuf Alireza said on Thursday that the group, which has been fending off criticism of its accounting, plans to raise at least $500 million through asset disposals or from a strategic investor.
United Co. Rusal, the world’s biggest aluminum producer last year, cut its demand forecast on a weaker outlook in emerging markets and said Friday that third-quarter profit fell 26 percent as prices of the alloy declined. Its shares in Hong Kong dropped 4.5 percent. Glencore Plc slid to a one-month low, tracking losses in its London listed shares that dropped below a pound for the first time in a month on Thursday.
The Bloomberg Commodities Index, a gauge of returns from futures contracts, slid for a seventh day on Thursday to the lowest since July 1999. It was little changed on Friday. West Texas Intermediate, the U.S. oil benchmark, extended its decline from the lowest close since August as the nation’s stockpiles expanded more than forecast. Gold traded near a five-year low, heading for a fourth week of losses, while the London Metal Exchange index of six metals including copper dropped to the lowest since 2009.
Traders are pricing in a 66 percent chance that Federal Reserve officials will start tightening monetary policy next month, up from 39 percent a month earlier. Higher rates make metals less competitive against assets that pay interest or offer dividends. Raw materials are already suffering from a glut, with OPEC saying this week that the oversupply of crude is the largest in a decade.
China’s broadest measure of new credit slumped to a 15-month low in October, a report Thursday showed, as interest-rate reductions by the central bank failed to spur borrowing. Industrial output matched the weakest gain since the global credit crisis last month, while consumer inflation waned, data showed.