Darren Kugler
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Darren Kugler in Commodities,

Commodities Drop Signals Global Growth Concern

The slump in commodity prices to a five-year low signals investors are cautious about the strength of the global economy even as U.S. equities rise to a record.

The CHART OF THE DAY shows the Bloomberg Commodity Index of 22 raw materials slipped 5.6 percent this year. Brent crude is down 12 percent and touched a two-year low last week, while iron ore at the Qingdao port in China plunged 41 percent to the lowest since 2009.

Improving U.S. data pushed the Standard & Poor’s 500 Index to an all-time high this month and sent the dollar to the strongest in four years against 10 major peers. Commodities are lagging behind as European policy makers rely on more stimulus to boost a recovery and economic growth slows to the weakest in 24 years in China, the biggest user of iron ore to soybeans. Prices also fell on bulging oil inventories and record harvests.

“There’s high pessimism among speculative financial investors on commodities,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. “We all should know that the economic recovery in Europe is slow, but that the U.S. should be doing relatively well. In China, concerns about economic growth there are mounting and we can see the results in the lower prices.”

Oil inventories in developed countries probably expanded last month at twice the usual pace for the time of year, the International Energy Agency said on Sept. 11. Supply will beat demand in aluminum to nickel to iron ore this year, Morgan Stanley estimates. Corn, wheat and soybeans dropped at least 21 percent in Chicago in 2014 as the U.S. Department of Agricultureanticipates record global harvests.

The nation, the second-biggest crude oil consumer after the U.S., will expand 7.4 percent this year, the least since 1990, economist estimates compiled by Bloomberg show.

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