New York: Concerns about slower economic growth in China and Europe pressured commodity prices again on Thursday, prompting investors to dump stocks and risky assets in favour of bonds and the dollar.
China lifted bank reserve requirements again on Thursday to try to rein in inflation even after signs its economy was already slowing. Meanwhile data showed euro zone industrial production fell unexpectedly in March suggesting the region’s economy grew slower in the first quarter than economists anticipated.
The US economy also struggled to gain momentum early in the second quarter, with retail sales posting their smallest rise in nine months in April and wholesale prices increasing more than expected.
Persistent speculation about a possible Greek debt restructuring also caused investors to pare their holdings of higher-risk assets and pressured the euro for a second day, helping to lift the dollar.
Crude oil, priced in dollars, fell almost 1%, while gold and silver fell sharply for a second day, and copper prices sagged to a five-month low as last week’s slump in commodity prices resumed.
Investors also sold stocks worldwide. The Thomson Reuters global stock index declined 1%.
The FTSEurofirst 300 index of top European shares was down 1%, while Tokyo’s Nikkei closed down 1.5%. Wall Street opened 0.2% lower after falling 1% on Wednesday.
The commodities slump is “front and center” among drivers of the equities market, said Rick Meckler, president of LibertyView Capital Management in New York.
“Watching commodities’ volatility increase is just making people aware the potential exists for equity volatility to pick up in a similar fashion,” he added.
Oil prices stayed under pressure in the wake of a surprise rise in US gasoline inventories.
Brent crude fell 1.3% to $111.7 per barrel, extending the previous day’s fall of more than 4%, according to Reuters data. US crude fell 1.8% to $96.4, adding to its 5% tumble on Wednesday.
Silver fell 7.6% to $32.8 an ounce, hitting its weakest since late February. Gold slipped 1% to $1,483.5 per ounce.
Copper was last down 0.9% at $8,626.5 after falling to $8,504.5, its weakest since early December.
Nervous investors piled into low-risk government debt and the dollar, which rose to a three-week high versus a currency basket and six-week high versus euro.
German Bund futures rose 35 basis points to their highest level since early March, but gains were limited after Irish and Portuguese debt rallied after Finland backed a bailout package for Lisbon.
The yield on benchmark 10-year US government notes slipped to 3.19%, hovering at the lowest level in about two months. Some analysts expect the latest bout of risk aversion will prompt investors to continue unwinding carry trades in which they borrowed dollars to buy higher-yielding assets.
Rodrigo Campos in New York; Naomi Tajitsu and London Markets Team contributed to this story.