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Commodities plunged across the board Monday as a global meltdown in financial markets broadened, as investors turn risk-averse in the wake of U.S. data signaling a deterioration in the economy and a potential recession.
Today’s rout began in Asia, where Japan’s Nikkei index tumbled more than 12% in its worst single-day percentage drop since October 20, 1987.
Copper (HG1:COM) dropped as much 3.8% to four-month lows on the London Metal Exchange as industrial metals from aluminum (LMAHDS03:COM) to zinc fell on the LME, silver (XAGUSD:CUR) sank more than 3% to lead precious metals lower, and benchmark crude oil contracts fell more than 2% before recovering much of those losses.
For commodities such as copper that are linked to industrial cycles, a hard-landing in the U.S. economy would add pressure on bulls who bet on a surge in global demand earlier this year.
Among potentially relevant stocks: Hudbay Minerals (HBM) -6.1%, Alcoa (AA) -5.3%, Century Aluminum (CENX) -5.2%, Compass Minerals (CMP) -5.1%, Kaiser Aluminum (KALU) -4.3%, Freeport-McMoRan (NYSE:FCX) -3.3%, Teck Resources (TECK) -3.3%, Southern Copper (SCCO) -3.1%, BHP (BHP) -2.2%, Vale (VALE) -1.2%, Rio Tinto (RIO) -0.7%.
ETFs: (COPX), (CPER), (OTC:JJCTF), (SLV), (PSLV), (SIVR), (SIL), (SILJ), (GLD), (GDX), (GDXJ), (IAU), (NUGT), (PHYS), (GLDM), (AAAU), (SGOL), (BAR), (OUNZ)
Gold, which likely would benefit during worries over economic weakness, also fell sharply before rebounding as investors closed out trades to cover losses elsewhere – a common occurrence during large-scale selloffs – but many analysts believe the metal’s status as a safe-haven trade should soon reassert itself if the turmoil continues.
Commodities are getting hit by this risk-off event, but looking out on the horizon, a weaker U.S. dollar and rate cuts could provide support for the asset class,” Marex commodities strategist Ryan Fitzmaurice told Bloomberg.