Commodities risk ‘across the board’ losses on trade war hit

  • Copper extended losses Monday, heading toward $6,000 a ton, while corn, wheat and soybeans declined
  • Gold erased losses as investors seek haven assets

Singapore: Commodity investors are taking a beating after China retaliated against US tariffs, deepening concerns the trade war will derail global growth, hurting demand for raw materials.

The Chinese Ministry of Finance said the country will raise the levies on some American goods beginning June 1. The escalation of the dispute between Washington and Beijing would weaken commodity prices across the board, Commonwealth Bank of Australia said in a note on Monday, before China issued the decision on tariffs. Metals are expected to be the most vulnerable, but oil should be hurt too, it said.

The Bloomberg Commodity Index Total Return was down 0.1% at 165.1098 at 8:37 am in New York after a run of four straight weekly declines. A drop below 159.72 would erase this year’s gains for investors.

Commodities have been undermined as US-China relations worsened, with Washington slapping extra tariffs on mainland goods last week and lining up further measures, while Beijing responded Monday. Copper extended losses Monday, heading toward $6,000 a ton, while corn, wheat and soybeans declined. Gold erased losses as investors seek haven assets.

Apart from oil, “practically everything else is down today, dragged lower by ongoing trade tensions," Ed Meir, an analyst at INTL FCStone in New York said in a note Monday. “Clearly, deteriorating trade sentiment is a negative for practically all markets, especially as it continues to corrode and undermine cross-border business investment."

Larry Kudlow, President Donald Trump’s top economic adviser, said on Sunday that no further talks had been scheduled, though he raised the possibility Trump and President Xi Jinping will meet on the sidelines of a Group of 20 summit in Japan in June.

On Monday, US officials are expected to announce details of the plan to impose a 25% tariff on all remaining imports from China -- some $300 billion in trade. Beijing is still working on its own retaliations to last week’s move by Trump to impose the 25% tariff on products worth $200 billion annually.