Commodities Escape Worst of Market Rout on Robust Demand Outlook – by Jake Lloyd-Smith and Heesu Lee (Bloomberg News – February 6, 2018)

Commodities are escaping the worst of the global market rout as losses in raw materials are capped by speculation that the bullish outlook for demand remains intact.

The Bloomberg Commodity Index pared its decline to only 0.1 percent by the end of the Asian day as gains in precious metals and U.S. natural gas helped offset lower oil and industrial metals.

While some raw materials were dragged lower as investors eschew risk, the reaction was muted compared with other assets. Stock markets from Hong Kong to Tokyo tumbled more than 4 percent following Monday’s collapse in U.S. equities and bond yields.

Commodities surged in January to the highest level since 2015 amid projections for the strongest global growth since 2011. Goldman Sachs Group Inc. last week said it’s the most bullish on raw materials since the end of the supercycle in 2008 as growing demand eats into stockpiles. The global equity rout doesn’t change the market fundamentals, according to banks including Australia & New Zealand Banking Group.

“Clearly there is a risk off tone in the markets that will weigh on the sector,” said Daniel Hynes, a senior commodities strategist at ANZ. “But there is no fundamental reason for this selloff to change our view of commodity markets.”

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