Markets Tumble as China Weakness Spreads
Singapore. Commodities markets tumbled in Asia on Monday as fears spread that a more severe slowdown in China would pull down other economies in the region, denting energy and raw material consumption.
Chinese stock indices like the CSI300 and the Shanghai Composite Index fell on Monday, dragging on Japan's Nikkei index as worries over slower Chinese growth intensified.
The Aussie dollar dropped as iron ore miner Fortescue saw its annual profits collapse almost 90 percent.
The weak sentiment in Asia hit oil, the dominant fuel for transportation and the most traded commodity.
The two most important crude futures, US West Texas Intermediate (WTI) and globally traded Brent, marked fresh six-year lows on Mondays, dropping to levels last seen during the peak of the credit crunch of 2009.
WTI traded well below $40 a barrel and Brent had fallen under $45 per barrel by 0340 GMT.
With crude prices now down 60 percent from last year's high, revenues from oil exporting countries are being hammered.
"The continued fall in oil prices and uncertainty about China's growth prospects have added further downside risks to Saudi Arabia's macroeconomic outlook," Barclays said about the world's top crude exporter, which has been forced to issue bonds and eat into its foreign reserves to fill the gap of a huge budget deficit.
In coal, the most common source for electricity generation, API2 2016 futures already hit 12-year lows last week, and physical benchmarks like cargoes from Australia's Newcastle or South Africa's Richards Bay terminals have dropped to levels last seen before the 2008/2009 boom and bust.
Analysts said general market fundamentals were still weak and could result in further downward price adjustments.
"Global investor sentiment dipped in August to the lowest level since we started the survey," Morgan Stanley said, adding that an adjustment process was likely to be long and painful.
The market weakness is not just affecting energy prices, but also industrial commodities.
Copper and aluminium futures also lost more ground on Monday, with both markets dropping to the lowest levels since 2009.
Spot iron ore held at a more than two-week low of $55.60 a ton on Friday, according to data compiled by the Steel Index.
The rout has also spread to sectors that have so far been performing well.
The MAC global solar index, which soared in early 2015, has almost halved in value since April, pulled down by the tumbling Chinese stock markets.
Reuters
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