Commodity markets collapse due to protests in China
2022.11.28 12:01
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Commodity markets collapse due to protests in China
Budrigannews.com – Oil, grains, and safe-haven gold all saw significant multi-month lows on Monday as a result of concerns regarding rare demonstrations in China against COVID-19 curbs.
After months of stringent measures to curb the virus in one of the world’s largest raw material importers at a time when global economic headwinds mount and fears of a recession grow, the protests added a new political dimension to investor concerns.
Due to the invasion of Ukraine and subsequent sanctions against Russia, the international benchmark lost nearly all of its gains in 2022 and fell to $80.61 a barrel earlier in the session, its lowest level since January 4.
The most active wheat contract on the Chicago Board of Trade (CBOT) hit $7.82 earlier on Monday, the lowest level since August 22.
“China’s growth has been severely impeded by the persistent COVID restrictions.According to Craig Erlam, senior markets analyst at OANDA in London, “Having civil unrest added to this backdrop is bound to create immense uncertainty as the world’s second largest economy.”
“It remains to be seen whether the leadership pays attention and investigates the possibility of loosening its zero-COVID policy, or whether it tries to redouble its efforts and suffers the economic consequences,”
Even though most of the world has lifted most restrictions, China has maintained President Xi Jinping’s signature zero-COVID policy.
As protests over the restrictions continued for a third day and spread to several cities, hundreds of demonstrators and police clashed in Shanghai on Sunday night. On Monday, police stopped and searched people at the sites of weekend protests in Shanghai and Beijing.
On Monday, gold prices reached a higher level than they had been in a week thanks to a decline in investor appetite. Meanwhile, prices fell due to concerns about China’s demand, but a weaker dollar supported sentiment.
As markets prepare for a meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) over the weekend, which could rein in supply as economic woes hit demand, the impact on energy has been particularly significant.
“A money manager exodus is accompanied by a meltdown in energy markets that continues to gain momentum.”As demand fears weigh, concerns about Chinese oil demand are adding to downside pressures on the complex,” stated analysts at the Canadian bank TD Securities.
Traders are keeping an eye on Beijing’s next move.
“There is a risk of social instability as traders await the reaction of President Xi,” says Chicago-based consultancy AgResource Co. “CBOT futures are lower amid China’s rising daily Covid infections and the weekend protest of the government’s lockdown policy.”
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