Oil, copper tumble on recession fears

Published July 7, 2022
Copper  prices slid to their lowest in almost 20 months at the London Metal Exchange on Wednesday.—Reuters
Copper prices slid to their lowest in almost 20 months at the London Metal Exchange on Wednesday.—Reuters

LONDON: Recession worries pushed the price of Brent oil briefly back under $100 on Wednesday and the euro moved closer to parity with the dollar.

While copper prices slid to their lowest in almost 20 months as persistent worries that a recession would dampen metals demand hit a market with thin summer volumes.

Three-month copper on the London Metal Exchange (LME) dropped as much as 4.9 per cent to $7,291.50 a tonne, its lowest since Nov 25, 2020. By 1600 GMT it had pared losses to a 1.9pc decline at $7,526.

European stocks rebounded thanks to lower bond yields and bargain hunting, while US stocks dipped ahead of the release of the minutes of the latest US Federal Reserve meeting.

Europe’s benchmark crude oil contract, Brent North Sea, fell briefly under $100 per barrel in afternoon deals, following its US counterpart WTI which slumped below the symbolic level on Tuesday when prices plunged by nearly 10pc on concerns that a slowing global economy will dent demand for petroleum products.

Citi analysts have forecast that Brent could strike $65 later this year in the event of a prolonged worldwide economic downturn.

Meanwhile, the euro hit a fresh 20-year low point under $1.02 -- the European single currency fast closing in on parity as traders eye recession for the eurozone and the ECB’s slower moves to raise interest rates than the US Fed.

“A dip in government bond yields has paved the way for bargain hunters to swoop in and snap up European equities,” said market analyst David Madden at Equiti Capital.

Investors worried rising bond yields would crimp the ability of eurozone governments to support their economies.

Paris stocks rose 2pc while Frankfurt climbed 1.6pc.

Nevertheless, “the mood remains febrile”, said Chris Beauchamp, chief market analyst at online trading platform IG.

“The drop in the euro and weakness in yields shows that investors remain very nervous about the economic prospects of the global economy, and the opportunistic bargain hunting in stocks may not have much staying power,” he warned.

London’s benchmark FTSE 100 index managed to gain 1.2pc despite the political turmoil after UK Prime Minister Boris Johnson was rocked by the resignation of finance minister Rishi Sunak. The pound dipped below $1.18, however.

Elsewhere, Asian equity markets closed mostly lower amid a fresh flare-up of coronavirus cases.

Published in Dawn, July 7th, 2022

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