Global equity selloff has had a ripple effect on the commodities markets with prices of major global commodities falling between 1 and 3.2 per cent on Friday. This is owing to the widespread coronavirus outbreak across the world which pushed the global economy into uncertainty, says a Business Standard report.
The decline was sharper in India due to nearly 1 per cent depreciation in the rupee, which closed at Rs 72.17 against the dollar last week. All base metals on the benchmark London Metal Exchange (LME) reported a decline of up to 1.7 per cent. Energy, including crude oil and natural gas, slumped by up to 1.2 per cent in London.
Also, the global economic stimulus, started with Japan and China, is set to support the declining trend in interest rates. This may weaken demand for base metals and the energy segment.
Commodities’ prices in general declined sharply last week due to global economic uncertainty following reports of new cases of coronavirus coming in outside China. Crude oil led the steep decline in prices of global commodities last week. This outbreak has lowered trade with countries that reported increasing number of virus patients, pushing the entire world into uncertainty.
On the benchmark Multi Commodity Exchange (MCX), crude oil futures for May settlement contract declined by 3.06 per cent to trade at Rs 3,291 a barrel. The previous day’s close was Rs 3,395 a barrel. In the international markets, crude oil fell by 1.2 per cent to trade at $50.20 a barrel.
Base metals on the LME declined to multi-year lows with three months forward aluminium prices plunging by 0.8 per cent to trade at $1,676 a tonne, the lowest in 40 months. Similarly, the three-month zinc prices fell by 2.1 per cent to $1,970.50 a tonne, its lowest since June 2016.
Meanwhile, analysts expect the Federal Reserve to cut interest rates to support the economy. China has already pared its rates.