Industrial commodities drag global markets down

Industrial commodity values have taken a hit thanks to the continued uncertainty surrounding China’s economy, and the possibility of further devaluations of the yuan.

The price of crude oil has been particularly effective, with the cost per barrel dipping to a six-year low in the US.

As a result of this, European and American stock markets have dropped slightly. The FTSE Eurofirst 300 has fallen by 0.5 per cent, and the American Standard & Poor 500 was down seven points on opening to 2084.5.

US dollar remains strong

Overall, WTI oil is down 0.6 per cent to $42.25, which is approaching a low last seen in 2009. Manoeuvring in the Middle East and China’s economic problems mean that these levels are likely to hold, at least for the next few months.

However, the US dollar has remained strong, despite a drop in the New York-based Empire State index, which reached its lowest level since 2009. The dollar index is up by 0.1 at 96.76, which is only just below (by four per cent) the 12-year high observed in March 2014. The continuing rise of the dollar appears to be based on hopes that the Federal Reserve will raise interest rates in the near future, for the first time since the financial crisis hit.

The US bond yield is now down 3 basis points at 0.70 per cent, which is only slightly short of the four-year high recently recorded.

Markets start to stabilise

Markets around the world are now beginning to stabilise, as the People’s Bank of China has offered public reassurances that a major revaluation of the currency is not a part of its economic plans, and action will be taken if the markets experience turmoil because of this.

No further devaluations of the yuan have occurred since Friday, but three in the space of a single week had made some traders wary of China’s intentions. However, many other Asian currencies remain under significant pressure, due to fears that China may try to start a currency war.