Commodity Rout Pummels Miners, Energy Shares; Stocks End Mixed
The rout in commodities worsened as the prospect of higher U.S. interest rates sent gold to the lowest level in more than five years and oil beneath $50 a barrel.
Bullion lost 2.2 percent to settle at $1,106.80 an ounce by 4 p.m. in New York, sending the Bloomberg Commodity Index to a 13-year low. Mining stocks drove equity losses around the world, with selling heaviest among emerging-market resource producers. U.S. crude slumped below $50 a barrel for the first time in more than three months. The euro traded near a two-month low as most commodity-linked currencies slipped. The Standard & Poor’s 500 Index briefly topped its closing record before closing little changed. Technology shares extended gains.
The outlook for precious metals and oil has soured as investors refocus on U.S. monetary policy, with bets the Federal Reserve is moving closer to boosting rates fueling a resurgence in the dollar. Gold slid the most in two years during 15 minutes of Asian trading Monday. AngloGold Ashanti Ltd. tumbled to a record low in Johannesburg and Canada’s Barrick Gold Corp. hit levels last seen in 1990.
“We’ve seen a resumption of a rally in the dollar and if you do the math, that’s bad for commodity prices,” said Peter Sorrentino, a Cincinnati-based fund manager at Huntington Asset Advisors Inc., which oversees $1.8 billion. “The implications there for the hard asset part of the global economy is pretty abysmal looking out to the rest of the year.”
The S&P 500 briefly topped its May 21 record before paring gains as energy and materials shares fell at least 0.9 percent. The index had fallen as much as 4 percent from its high before climbing back toward that level, with most of the gains coming during a 2.4 percent rally last week.
Visa Inc.and Apple Inc. paced gains in technology shares Monday, with banks and health-care shares also advancing. Morgan Stanley rose after posting profit that beat analysts’ estimates, while Halliburton Co. advanced after its earnings fell less than predicted. Lockheed Martin Corp. climbed after its quarterly results exceeded estimates.
“There really isn’t much to sink your teeth into today,” said Mark Luschini, chief investment strategist in Philadelphia at Janney Capital Management LLC, which oversees about $68 billion. “The market may hesitate here as we move to the intraday high or closing high. We’re really going to need a catalyst to move to these new highs and stay there.”
Fed Chair Janet Yellen has signaled the central bank may raise key rates this year on the back of an improving U.S. economy. Higher borrowing costs curb the attractiveness of commodities such as gold, which doesn’t pay interest or give returns like assets including bonds and equities. Most raw materials are also priced in U.S. currency.
The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, rose a fourth straight day, adding 0.2 percent to its highest level since March. The Norwegian krone, South African rand and Brazilian real slipped at least 0.3 percent, while New Zealand’s dollar reversed losses after the prime minister, a former currency trader, said its slump over the past year was faster than expected.
U.S. Treasuries declined, pushing two-year yields to a three-week high, after St. Louis Fed Bank President James Bullard said policy makers should prepare to raise interest rates this year. Yields on two-year notes rose four basis points, or 0.04 percentage point, to 0.70 percent. Ten-year Treasury rates added three basis points to 2.37 percent.
The euro was little changed at $1.0825, near its weakest level since April 24, as the divergence in monetary policy between the Fed and other central banks bolstered the dollar. The yen slipped 0.2 percent to 124.27 against the U.S. currency, with markets in Japan closed for a holiday.
The stronger dollar contributed to a sixth day of losses for gold, which sank as much as 4.2 percent. Prices tumbled 2.5 percent last week, the most since March, after China revised the size of its gold reserves to a level that was lower than analysts had estimated. The SPDR Gold Trust, the world’s largest exchange-traded gold fund, dropped 2.7 percent to the lowest level since 2010.
The rout in gold sent commodity producers tumbling around the world. Newmont Mining Corp. sank 12 percent and Freeport-McMoRan Inc. lost 5.2 percent to lead declines in the S&P 500. Randgold Resources Ltd. paced losses in Europe, while South Africa’s AngloGold Ashanti was the worst performer among emerging-market equities. Silver, platinum and palladium futures all sank more than 1.3 percent.
West Texas Intermediate crude for August delivery fell 1.5 percent to $50.15 a barrel in New York, the lowest settlement since April 2. Futures touched $49.85, their weakest intraday price since April 6. Brent for September settlement declined 1 percent to $56.51 a barrel in London.
Sugar fell to a six-year low on speculation that a global glut will increase as the harvest accelerates in Brazil, the world’s top producer of the commodity. The drop was the biggest among 22 raw materials in the Bloomberg Commodity Index.
In Europe, the Stoxx Europe 600 added 0.3 percent to cap a ninth day of gains, its longest winning streak since April 2014. The gauge rallied 4.3 percent last week, the most since January, and closed 2 percent away from a record.
Greece ordered repayment of 6.8 billion euros ($7.4 billion) to creditors, the Finance Ministry said. While banks reopened three weeks after closing to prevent economic collapse, the country’s financial markets remain shut.
“It’s good to see that Greece is moving out of the headlines,” Alessandro Bee, a strategist at Bank J Safra Sarasin, said by phone from Zurich. “The worst has been avoided and the risk-aversion sentiment that dominated markets has definitely eased. More M&A activity is among things showing that confidence is returning.”
Chinese stocks also climbed, easing concern over the stock rout there. The Shanghai Composite Index added 0.9 percent in a third day of gains, extending last week’s 2.1 percent rebound.