Just when markets were beginning to recover on optimism the U.S. and China could reach an agreement and take the heat out of their escalating trade war, the U.S. president called for tariffs on an additional $100 billion in imports from the Asian nation, sending copper, soybeans and oil lower on Friday along with U.S. equities futures.
It’s been a turbulent week for commodities as they’re sucked deeper into the tussle between the world’s two biggest economies. U.S. soybean futures were hammered on Wednesday after China said it would impose tariffs on U.S. imports, which it buys in greater volume than any other country, while copper came under pressure on concern the trade war would dampen economic growth and hurt demand.
“Commodities are tumbling today on a global sell-off in risky assets as Trump continues to hold an aggressive stance in his dispute with China,” Ahn Yea Ha, a commodities analyst at Kiwoom Securities Co., said by phone from Seoul. “Unless we see the two countries having a negotiation to iron out differences, downward pressure on commodities will remain.”
Soybeans were among the biggest losers on Friday as Trump’s call for more tariffs dampened any optimism that some sort of agreement could be reached between the world’s top producer and its biggest customer. Prices slid Wednesday after China said it planned to impose a 25 percent duty on U.S. soy in addition to other agricultural produce, though they recovered somewhat the following day on hope that an accord could be struck.
“Concerns are growing that the U.S. proposal of additional tariffs may prompt China to take further retaliatory measures against U.S. agricultural imports,” said Takaki Shigemoto, an analyst at JSC Corp. in Tokyo.
May soybean futures were 1.5 percent lower at $10.1575 a bushel on the Chicago Board of Trade at 11:18 a.m. in London. Trading volume was almost double the average for the time of day.
Copper, too, had recovered from losses earlier in the week in the wake of China’s threatened tariffs on $50 billion of U.S. goods. But it was back down again on Friday, losing 0.9 percent on the London Metal Exchange as base metals retreated.
Gold has been a rare beneficiary of the spat, eking out a gain of 1.7 percent this year amid trade-war fears and equity-market volatility. While investors seek bullion as a haven during market turmoil, which sent the metal on a wild ride Wednesday, they have been skittish due to the prospect of tighter U.S. monetary policy and stronger global growth. A report Friday is forecast to show the U.S. jobs market strengthened in March.
Investors have been piling into bullion, taking holdings in all exchange-traded funds tracked by Bloomberg to 73.3 million ounces, the highest in almost five years. Spot bullion was little changed at $1,324.53 an ounce.
“Metals have reacted negatively while bullion has regained confidence,” said Gnanasekar Thiagarajan, a director at Commtrendz Risk Management Services in Coimbatore. “The ongoing news flow on the trade war on a daily basis is bound to dent confidence for risky assets and favor bullion going forward.”
Oil markets aren’t immune. Futures were down about O.4 percent in New York and London, extending their weekly loss. Trump’s threats have lessened the likelihood of some sort of a deal, prompting investors to dump risky assets including crude, according to Hong Sungki, a commodities trader at NH Investment & Securities Co. in Seoul.
The Bloomberg Commodity Index of 22 raw materials has declined 4 percent from a more than two-year high in January as fears of a global trade war have deepened. It was 0.5 percent lower on Friday.
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