Home NewsStock Market News Even commodities have fallen into a bear market. “Recession trading” has made copper and crude oil collapse | Anue Juheng – International Political Economy

Even commodities have fallen into a bear market. “Recession trading” has made copper and crude oil collapse | Anue Juheng – International Political Economy

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Even commodities have fallen into a bear market. “Recession trading” has made copper and crude oil collapse | Anue Juheng – International Political Economy


A key commodity-tracking index fell 20% from its June high and entered a bear market, a sign that recession fears have dragged down an area that had been the most resilient, a stark difference from the roaring first half of the year.

The Bloomberg Commodity Spot Index, which tracks 23 commodities, entered a bear market on Wednesday, falling more than 20% from a recent high in June, reflecting the aggressive rate hikes by major central banks to combat inflation , making investors worried that the global economy will enter a recession and hit demand.

The sharp rise in the dollar also added to the blow to dollar-denominated commodities. The ICE U.S. Dollar Index (DXY), which tracks the U.S. dollar against six major currencies, briefly topped 107 on Wednesday, its highest level since 2002.

After falling below $100 a barrel on Tuesday, West Texas crude in New York fell another 1 percent to $98.53 a barrel on Wednesday, having retreated 20 percent from recent highs. London’s Brent crude oil has fallen 10% this week alone, and briefly fell below $100 on Wednesday, down 29% from its recent high.

From energy, metals to agricultural products, the S&P GSCI agriculture index fell 28% from its mid-May high, and the London Metal Exchange (LME) index tracking six metals also fell three points from its March high. one.

Copper, considered a barometer of the global economy, fell as low as $7,597 on the LME on Wednesday, hitting a 19-month low. Copper prices have fallen more than 20 percent this year and are on track for their worst quarterly decline since the 2008 financial tsunami.

The entire metal market is now dominated by fears of a global recession, with not only copper, but also industrial metals such as zinc and aluminum, as well as precious metals such as silver and gold.

Hedge funds are reducing their long positions in commodities, and some are turning short, such as the Florin Court Cpital fund, which is short of metals traded in China, including zinc, nickel, copper and iron ore.

The U.S. Commodity Futures Trading Commission (CFTC) reported that 153,600 contracts worth $8.2 billion of crop futures settled in the week ended June 28, the second-highest number of long positions sold.

Greg Sharenow, manager of energy and commodities at PIMCO, said that the market has clearly overreacted, leading to prices of raw materials such as oil that are still in tight supply, and prices have returned to pre-Russian-Ukrainian war levels. He predicts that demand will remain tight in the coming months as the Chinese economy rebounds.

However, as the supply of goods is still tight at present, the fall in prices is expected to give consumers who suffer from high inflation a little respite.

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