Commodities: Black Monday pummels base metal, oil futures

Much of the commodities futures market took a beating after China’s dire ‘Black Monday’ dominated Asian trading, as the Shanghai Composite Index closed down 8.5%, triggering widespread declines in European and US equities.

Beijing’s latest intervention to allow its main state pension fund to invest in the stock market failed to soothe fears about the slowdown in China. Both oil benchmarks were firmly in negative territory plummeting to lows last seen in 2009, with Brent and WTI trading below $45 and $40 respectively.

At 1604 BST, the Brent October contract was down 4.25% or $1.93 to $43.53 per barrel, while the WTI was down 3.68% or $1.49 to $38.96.

Alastair McCaig, market analyst at IG, said, “Oil prices have continued falling and even though they’ve been sitting in oversold territory for more than a week, the increasing doubts over China’s abilities to meet its 7% growth target is looking more and more unachievable, and has helped drive prices lower.”

Meanwhile, the base metals market came in for severe punishment over the European session. Past the midway point in trading on the London Metal Exchange, three-month delivery contracts of primary aluminium (down 2.6%), copper (down 3.1%), lead (down 4.2%), nickel (down 7.3%), tin (down 3.7%) and zinc (down 3.0%) were all in the red.

Analysts at Sudcen Financial noted, “There was no hiding place for traders or investors during the London morning and it was not until mid-afternoon that some recovery in prices was seen. LME trading volume was good but conditions were nervous and choppy.”

With the prospect of a September US interest rate hike receding and global equities tumbling, investors flocked towards gold, with the yellow metal managing to stay in positive territory albeit marginally.

COMEX gold for December delivery was trading at a near six-week highs, up 0.16% or $1.90 to $1,161.50 an ounce, while spot gold was down 0.23% or $2.62 at $1,158.15 an ounce, following high demand in emerging markets.

But elsewhere in the precious metals market, COMEX silver fell 32 cents or 2.10% to $14.98 an ounce, while spot platinum was down 3.01% or $30.70 at $988.80 an ounce.

Finally, major agricultural commodities futures also took a hit. CBOT corn (down 0.27%), wheat (down 0.15%), ICE cocoa (down 0.49%) and CME live cattle (down 1.11%) were all trading lower. However, ICE cotton futures took the biggest hit, shedding 3.72% or $2.49 to $64.42 per pound.