Commodities Drop; Oil Prices Down
Oil resumed declines after jumping from a five-year low and metals retreated amid the highest commodity-price volatility in two years. Asian stocks rebounded and South Korea’s won led emerging-market currencies higher.
West Texas Intermediate crude retreated 0.5 percent by 1:04 p.m. in Tokyo, after yesterday’s 4.3 percent surge from its lowest settlement since September 2009. Gold, which rallied 3.8 percent yesterday, slid 0.5 percent. BHP Billiton Ltd. (BHP), the world’s largest mining company, climbed 3.8 percent and was the biggest support to the MSCI Asia Pacific Index (MXAP) today. The won strengthened 0.6 percent and Malaysia’s ringgit added 0.3 percent after capping its steepest two-day retreat since the Asian financial crisis.
Rebound Retraced
The Bloomberg Commodity Index (BCOM), which rebounded off a five-year low yesterday, is swinging the most since October 2012, according to a 60-day measure of historic volatility. Prices for materials and energy plunged, fueling deflation concerns, on concern that supply is outstripping demand as estimates for global growth are downgraded. Australia held rates steady, with India are projected to do the same before the euro region reviews monetary policy later this week.
“The fall in oil prices is positive for some countries like the U.S. and Japan, but can also be negative for emerging markets, which in turn could cause exports to decline and drag down the global economy,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 39 trillion yen in assets. “In the grand scheme of things, central banks are continuing with stimulus so money is flowing into stocks and is supporting the bottom. While there are many concerns out there, excess liquidity will support the market.”
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As oil prices drop, will we see a continued knock on effect with gas prices? I predict prices will soon start rising again.