Sun, Apr 08, 2018 - Page 14 News List

Commodity markets hit again as Trump ups ante

Bloomberg

US President Donald Trump’s latest salvo against Chinese imports is hitting commodities again.

Just when markets were beginning to recover on optimism the US and China could reach an agreement and take the heat out of their escalating trade war, the US president called for tariffs on an additional US$100 billion in imports from the Asian nation, sending copper, soybeans and oil lower on Friday along with US equities futures.

It has been a turbulent week for commodities as they are sucked deeper into the tussle between the world’s two biggest economies.

US soybean futures were hammered on Wednesday after China said it would impose tariffs on US imports, which it buys in greater volume than any other country, while copper came under pressure on concern the trade war would dampen economic growth and hurt demand.

“Commodities are tumbling today on a global sell-off in risky assets as Trump continues to hold an aggressive stance in his dispute with China,” Ahn Yea-ha, a commodities analyst at Kiwoom Securities Co, said by telephone from Seoul. “Unless we see the two countries having a negotiation to iron out differences, downward pressure on commodities will remain.”

Soybeans were among the biggest losers on Friday as Trump’s call for more tariffs dampened any optimism that some sort of agreement could be reached between the world’s top producer and its biggest customer.

On Wednesday, prices slid after China said it planned to impose a 25 percent duty on US soy in addition to other agricultural produce, though they recovered somewhat the following day on hope that an accord could be struck.

“Concerns are growing that the US proposal of additional tariffs may prompt China to take further retaliatory measures against US agricultural imports,” said Takaki Shigemoto, an analyst at JSC Corp in Tokyo.

May soybean futures were 1.5 percent lower at US$10.1575 a bushel on the Chicago Board of Trade. Trading volume was almost double the average for the time of day.

Copper, too, had recovered from losses earlier in the week in the wake of China’s threatened tariffs on US$50 billion of US goods. However, it was back down again on Friday, losing 0.9 percent on the London Metal Exchange as base metals retreated.

Gold has been a rare beneficiary of the spat, eking out a gain of 1.7 percent this year amid trade war fears and equity-market volatility.

While investors seek bullion as a haven during market turmoil, which sent the metal on a wild ride on Wednesday, they have been skittish due to the prospect of tighter US monetary policy and stronger global growth.

Investors have been piling into bullion, taking holdings in all exchange-traded funds tracked by Bloomberg to 73.3 million ounces, the highest in almost five years.

Spot bullion was little changed at US$1,332.72 an ounce, up 0.5 percent from last week’s US$1,325.50 an ounce.

“Metals have reacted negatively while bullion has regained confidence,” said Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services in Coimbatore, India. “The ongoing news flow on the trade war on a daily basis is bound to dent confidence for risky assets and favor bullion going forward.”

The Bloomberg Commodity Index of 22 raw materials has declined 4 percent from a more than two-year high in January as fears of a global trade war have deepened.

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