NEW YORK, March 15: A key commodity index posted its second-biggest fall in two years on Tuesday as the nuclear crisis in Japan sent fear rippling through financial markets, driving investors toward safer assets.
Brent crude oil fell almost 5 percent, its biggest drop in over 13 months, grain markets sank by their daily limit and sugar slumped 8 percent in a broad sell-off that wiped about $625 billion off the value of global equities.
Even safe-haven gold was caught in the selling frenzy, with traders liquidating profits to cover margin calls in other markets. They piled into government debt.
Fundamentals were set aside as the 19-component Reuters-Jeffries CRB commodity price index slid 3.56 percent, its second-biggest percentage loss since April 2009. The index fell 3.57 percent on Nov. 12, 2010. It was the sixth straight daily loss, the longest losing streak since August.
"It's not really fundamental concerns that Japan, one of the largest oil consumers, will be missing over the next few months," Commerzbank analyst Eugen Weinberg said.
"It's more sentiment that is depressing the prices of risk assets such as equities and commodities," he said.
The earthquake-crippled Fukushima nuclear power plant sent low levels of radiation floating towards Tokyo on Tuesday as a crack in the roof of one reactor exposed spent fuel rods to the air.
European shares hit a 3-1/2-month closing low. Wall Street almost wiped out this year's gains so far, dropping at one stage to within four points of its 2010 closing level, before paring losses.
Brent crude fell to $108 a barrel for the first time in nearly three weeks and closed down 4.5 percent.
Oil markets also tracked developments in Bahrain, where the king declared martial law as his government struggled to quell an uprising by the island's Shi'ite Muslim majority that has drawn in troops from fellow Sunni-ruled neighbor Saudi Arabia.
Natural gas futures in the United States were one of the few commodities to buck the trend, holding firm on expectations Japan will import more liquefied natural gas to cover the power lost from its stricken nuclear sector.
GOLD SINKS
Gold shed 2.3 percent, dipping below $1,400 an ounce, as declines in stock markets forced speculators to sell bullion to cover losses, with Japanese stocks plunging 10.6 percent and posting their worst two-day rout since 1987.
UBS strategist Edel Tully said in a note that gold was not in danger of losing its traditional safe-haven status, with the market likely to reassert itself.
"We argue that it's not unusual for gold to tumble during initial episodes of a severe broad asset sell-off. Investors sometimes have little choice but to sell the yellow metal to cover margin calls and losses elsewhere before gold then divorces itself from the downtrend," Tully said.
COPPER DOWN
In industrial metals, London Metal Exchange (LME) three-month copper shed $77 to close at $9,118 per tonne, recovering from an earlier low at $8,944.50, its lowest since Dec. 16.
The metal, used in power and CONSTRUCTION [], has fallen more than $1,000 a tonne from the record $10,190 it hit last month.
"Looking at it from a market psychology point of view, you have headwinds in the form of heightened unrest in the Middle East and the uncertainty surrounding the implications of economic demands from the earthquake and tsunami," Barclays Capital metals analyst Gayle Berry said.
"But from a fundamental perspective, I think things are still shaping up nicely. You have this improvement in demand bubbling behind big headlines, but very short-term prices will remain dominated by the large number of uncertainties."
Grains futures were hammered by concerns about Japan, the world's biggest importer of corn and third-largest buyer of soybeans, the main ingredients in animal feed. It is also the world's fourth-biggest wheat importer, and plans to buy 4.96 million tonnes of milling wheat in the year to March 31.
Wheat futures fell more than 7 percent, while corn and soybeans lost 4.5 percent and 5.2 percent respectively.
Cocoa and coffee futures fell around 4 percent from Monday's close. - Reuters
Brent crude oil fell almost 5 percent, its biggest drop in over 13 months, grain markets sank by their daily limit and sugar slumped 8 percent in a broad sell-off that wiped about $625 billion off the value of global equities.
Even safe-haven gold was caught in the selling frenzy, with traders liquidating profits to cover margin calls in other markets. They piled into government debt.
Fundamentals were set aside as the 19-component Reuters-Jeffries CRB commodity price index slid 3.56 percent, its second-biggest percentage loss since April 2009. The index fell 3.57 percent on Nov. 12, 2010. It was the sixth straight daily loss, the longest losing streak since August.
"It's not really fundamental concerns that Japan, one of the largest oil consumers, will be missing over the next few months," Commerzbank analyst Eugen Weinberg said.
"It's more sentiment that is depressing the prices of risk assets such as equities and commodities," he said.
The earthquake-crippled Fukushima nuclear power plant sent low levels of radiation floating towards Tokyo on Tuesday as a crack in the roof of one reactor exposed spent fuel rods to the air.
European shares hit a 3-1/2-month closing low. Wall Street almost wiped out this year's gains so far, dropping at one stage to within four points of its 2010 closing level, before paring losses.
Brent crude fell to $108 a barrel for the first time in nearly three weeks and closed down 4.5 percent.
Oil markets also tracked developments in Bahrain, where the king declared martial law as his government struggled to quell an uprising by the island's Shi'ite Muslim majority that has drawn in troops from fellow Sunni-ruled neighbor Saudi Arabia.
Natural gas futures in the United States were one of the few commodities to buck the trend, holding firm on expectations Japan will import more liquefied natural gas to cover the power lost from its stricken nuclear sector.
GOLD SINKS
Gold shed 2.3 percent, dipping below $1,400 an ounce, as declines in stock markets forced speculators to sell bullion to cover losses, with Japanese stocks plunging 10.6 percent and posting their worst two-day rout since 1987.
UBS strategist Edel Tully said in a note that gold was not in danger of losing its traditional safe-haven status, with the market likely to reassert itself.
"We argue that it's not unusual for gold to tumble during initial episodes of a severe broad asset sell-off. Investors sometimes have little choice but to sell the yellow metal to cover margin calls and losses elsewhere before gold then divorces itself from the downtrend," Tully said.
COPPER DOWN
In industrial metals, London Metal Exchange (LME) three-month copper shed $77 to close at $9,118 per tonne, recovering from an earlier low at $8,944.50, its lowest since Dec. 16.
The metal, used in power and CONSTRUCTION [], has fallen more than $1,000 a tonne from the record $10,190 it hit last month.
"Looking at it from a market psychology point of view, you have headwinds in the form of heightened unrest in the Middle East and the uncertainty surrounding the implications of economic demands from the earthquake and tsunami," Barclays Capital metals analyst Gayle Berry said.
"But from a fundamental perspective, I think things are still shaping up nicely. You have this improvement in demand bubbling behind big headlines, but very short-term prices will remain dominated by the large number of uncertainties."
Grains futures were hammered by concerns about Japan, the world's biggest importer of corn and third-largest buyer of soybeans, the main ingredients in animal feed. It is also the world's fourth-biggest wheat importer, and plans to buy 4.96 million tonnes of milling wheat in the year to March 31.
Wheat futures fell more than 7 percent, while corn and soybeans lost 4.5 percent and 5.2 percent respectively.
Cocoa and coffee futures fell around 4 percent from Monday's close. - Reuters
No comments:
Post a Comment