Commodities Decline to 2009 Low as China Signals Slower Growth (US Interest Rates)

By Chanyaporn Chanjaroen Bloomberg Sep 22, 2014 1:45 AM ET

Commodities fell to a five-year low on speculation that slowing Chinese growth will temper demand in the world’s biggest metals and energy consumer.

The Bloomberg Commodity Index (BCOM) of 22 raw materials dropped as much as 0.7 percent to 118.652, the lowest since July 2009, before reaching 118.6568 by 1:44 p.m Singapore time. Corn and soybeans fell to the lowest since 2010 as nickel touched a five-month low and crude slid for the third time in four days.

Commodities are 12 percent lower this quarter, set for the biggest such loss since the financial crisis in 2008. China’s Finance Minister Lou Jiwei said in a statement yesterday that growth in Asia’s largest economy faces downward pressure. Data tomorrow may show China’s manufacturing slowing for a second straight month, according to a Bloomberg survey.

“We are looking at a downturn right now as China continues to disappoint,” Justin Smirk, a senior economist at Westpac Banking Corp., said today by phone from Sydney. “It’s about the uncertainty that people are worried about.”

A preliminary reading on the HSBC Holdings Plc and Markit Economics China Purchasing Managers’ Index for September will probably show a drop to 50 from 50.2 in August. A reading above 50 shows expansion.

Commodities have also slid this quarter as speculation the U.S. will lift interest rates boosted the dollar, increasing demand for commodities priced in the U.S. currency. The Bloomberg Dollar Spot Index is poised for a 5.1 percent advance, the most since 2011, and touched a four-year high on Sept. 18. U.S. Federal Reserve officials last week raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June.

Brent crude for November settlement slid as much as 0.6 percent to $97.85 a barrel on the London-based ICE Futures Europe exchange, set for a third month of losses. Soybeans in Chicago dropped as much as 1.5 percent to the lowest since July 2010 as U.S. farmers started to harvest the biggest crop ever. Nickel futures in London retreated as much as 4.6 percent.

To contact the reporter on this story: Chanyaporn Chanjaroen in Singapore at cchanjaroen@bloomberg.net

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