The commodity investors are taking flight over the looming fears that the spread of coronavirus could curtail the China’s demand of everything from crude oil to rubber.
The rise is death toll in china push the prices higher after of new cases emerge around the globe. China also extended its Lunar New Year holiday amid the official government reports that the infection’s spread at an incredibly high rate.
Traders who usually keep the commodities flowing in and out of the world’s biggest consumer, now would typically be expecting a rise in the demand after a pause during the Lunar New Year holidays that officially begun last week. But the rapid spread of coronavirus means this isn’t a typical year.
A portfolio manager, Jia Zheng, at hedge fund Shanghai Minghong Investment Management Co., said, “We should short everything,”
“With the spread of the epidemic, the domestic consumer market will shrink sharply, and construction will be delayed after the holiday.”
On Monday, the commodity’s Total Return Index at Bloomberg slipped 0.7% taking its losses over the past five days to almost 4 percent. Since September, the closing at this level would be its lowest.
Coronavirus epidemic speculation curtailed travel and industrial activity. Oil is also taking a lot of the pressure, as it could hit the demand for fuel. Brent crude index plummeted more than 3% in early Asian trade on Monday, January 27, 2020 after topping its longest run of weekly losses since June.
It’s been predicted by Goldman Sachs Group Inc., that the global oil demand may take a hit, and already seen the sell off. That has prompted the OPEC behemoth, Saudi Arabia to say that it is seeing very negligible impact on the oil consumption so far.
The base metals and the bulk commodities including copper and iron ore are closely aligned to China’s industrial activity and are also getting hurt. Since 2014, copper’s caught in its heaviest streak of losses with futures hitting a further 1.5% on LME on Monday. The Iron ore in Singapore had its biggest intraday drop-off since August.
There’s a broader exit from riskier assets across financial markets, with no sign of the relief from disease. Although many are closed for holidays including China, Hong Kong, South Korea and Australia. Contracts on the S&P 500 Index fell more than 1% before paring losses and Japan’s Topix slid.