Commodity rout?

Risk appetite is going out of the window today, with the media pin-pointing Glencore as the trigger for the risk selling. Commodity weakness was driving market sentiments today.

Mining trains

The nosedive in Glencore share prices (-29%) in London was carried over to the Hong Kong markets (-29%). But more importantly, the slumping price appeared to have a knock-on effect in Asia, and it’s not just mining counters that were bludgeoned.

There was an outsized selling in Japanese equities, where the Nikkei plummeted below key 17,000 to end 4.1% lower. Topix also tumbled 4.4%. ASX 200 convincingly pierced below psychological 5000 level, eyeing another test of the 25 August lows. China closed lower, alongside a 3% drop on the Hang Seng, after resuming trade after a long weekend. The STI was aggressively sold to as low as 2740 before staging a recovery above 2750.

The commodity complex was clearly affected by the Glencore’s feedback loop, and were smashed lower. The Bloomberg Commodity Index slipped towards the 16-year lows near 85. It is, however, interesting to note that crude oil prices remained quite resilient. This could be due to expectations of further decline in the US stockpiles with the API report due later tonight, ahead of Wednesday’s EIA report.

Commodity currencies stayed under pressure. AUD/USD remained capped below 0.70, while Kiwi trimmed early losses. A flight to safe-haven assets saw the Japanese yen breaking below 120 once again, touching as low as 119.25 before bouncing to 120 in late Asia.

Some calm appeared to have returned to the financial markets as European equities traded slightly higher, but it is too early to say if the commodity-related stock selloff is going to short-lived. It is perhaps wise to bear in mind that the commodity outlook has been gloomy for a while now.

We have not seen any substantial developments which would alter that prospect, be it an improvement or a deterioration. Therefore, it is likely that the reaction surrounding Glencore and mining related stocks may have over-extended.


*For more timely quips, you may wish to follow me on twitter at

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.