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Raw materials just capped the longest run of weekly declines this year as the United States (US)-China trade war heated up. More losses may follow.
Should the dispute escalate, we expect commodity prices to weaken across the board, Commonwealth Bank of Australia said in a note on Monday. Metals are expected to be the most vulnerable, but oil should be hurt too, it said.
Commodities have been undermined as US-China relations worsened, with Washington slapping extra tariffs on mainland goods last week and lining up further measures, while Beijing has vowed to respond. On Monday, copper dropped toward $6,000 a ton, agricultural mainstays corn and wheat declined, and even traditional haven gold failed to make any headway.
The Bloomberg Commodity Index was 0.3 per cent lower at 78.4497 at 9:03 am in London after a run of four straight weekly declines. A drop below 76.7154 would erase this years gains.
Larry Kudlow, President Donald Trump’s top economic adviser, said no further talks had been scheduled. However, he raised the possibility Trump and President Xi Jinping will meet on the sidelines of a Group of 20 summit in Japan in June.
On Monday, US officials are expected to announce details of the plan to impose a 25 per cent tariff on all remaining imports from China -- some $300 billion in trade. Beijing is still working on its own retaliations to last weeks move by Trump to impose the 25 per cent tariff on products worth $200 billion annually.
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