Returns from commodities have plunged to the lowest since 1987 on fears that the fast-spreading coronavirus will crush demand for raw materials, fuel and food across the globe.
The Bloomberg Commodity Index was already headed lower due to rising supplies and global trade wars even before the outbreak. Now, the spread of the virus is exacerbating its decline. The gauge slid for a fifth session Friday, taking its weekly loss to 6.6% in the worst performance since September 2011.
While the index posted significantly larger declines in the midst of the 2008 financial crisis, the coronavirus is dragging it on an outright basis to levels even lower than it hit at the time.
Almost no commodity has been spared, with global benchmark Brent crude sliding below $50 a barrel for the first time since December 2018, grain prices heading for a second monthly loss, and even gold — a haven asset — getting hit.
The rout is showing no signs of abating as the virus continues to spread, now more quickly outside of China than within the country where the outbreak began. Major commodity trading houses are keeping employees from going abroad and several events this week at the oil industry’s biggest gathering were canceled. Fear over the economic fallout has savaged markets, sending U.S. equities to a seventh straight loss.
“It has a major impact on demand when public life virtually comes to a standstill,” said Carsten Fritsch, a commodity analyst at Commerzbank AG. “Even gold seems not immune to this at the moment.”
(By Pratish Narayanan)