Commodity prices drop as fears of a new global crisis grow
Hong Kong (AsiaNews) – Commodity prices have fallen for a second day in early trading. Analysts say that investors sold off ahead of today’s US employment figures, which are expected to be negative, to avoid greater losses later. However, the real danger is that the longer the US economy is in the doldrums, the greater the risk for a global financial crisis.
Tokyo's Nikkei tumbled 1.82 per cent, Hong Kong was off 1.18 per cent, Shanghai lost 0.85 per cent, and Seoul slumped 1.58 per cent. Commodities were the biggest losers.
This follows yesterday’s drop, the biggest since 2009. Today Brent crude fell 5.8 per cent to US$ 105.15 a barrel before rebounding to US$ 111.90 a barrel. The price of US sweet, light crude oil fell a further 5.5 per cent on Friday morning to US$ 94.63 a barrel, but then recovered to almost 100 against 110 a few days ago.
Copper futures were down a further 1.75 per cent, following a 6 per cent slide a day earlier. Equally, gold, silver, gasoline, coffee, rice and cotton prices all fell. Silver, which had jumped 175 per cent in less than a week, lost 12.9 per cent yesterday, 31 per cent in a week. Gold dropped 3.6 per cent.
In Asia, investors tried to profit from lower prices. This limited overall losses, sending some signals that recovery might be around the corner. In fact, some analysts noted that losses were not too bad and that markets could rebound rapidly, as they have done after similar corrections over the past year.
But the real problem remains Europe’s and especially the US’s troubled economy. Today the Department of Labor is set to release April unemployment figures, which could be worse than forecast, thus signalling that the much-vaunted recovery might not be happening.
“We are paying close attention to the domestic discussion in the U.S. on debt and deficits,” Vice Finance Minister Zhu Guangyao said. “We hope the U.S. can take effective measures toward fiscal reorganization just as President Obama suggested.”
Many in fact fear that the US debt is getting worse in the absence of a sound policy to cut it.
Treasury Secretary Timothy F. Geithner said that despite steps already taken the US can borrow until 2 August after reaching the US$ 14.29 trillion debt limit this month.
Matthew Zames, chairman of a Treasury advisory panel and a managing director at JPMorgan Chase & Co., said last week that failure to raise the ceiling could trigger “another catastrophic financial crisis” like the subprime crisis. Now Washington must find ways to cut its debt, through lower spending and higher taxes.
About 30 top Chinese officials travel to Washington for an annual meeting on economic and military cooperation. It is likely that Beijing, which holds US$ 1.150 trillion in US Treasuries, will want to know the health of US finances.
The US has to take deficit-reduction measures “in order to improve the U.S. fiscal condition and to build a solid fiscal foundation for the long term sustainable growth of the U.S. economy,” Zhu said today.
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