The price of crude oil has slumped 1.6% to under $97 per barrel this morning, while copper is down 1.9% and most agricultural commodities are lower. Even natural gas is taking a hit: its price is down by 1.7% to $3.90 this morning.
The Standard & Poor’s GSCI Index of 24 raw materials lost as much as 2 percent to 622.91, the biggest intraday loss since May 10, before reaching 625.31 as of 1:41 p.m. in London.
Bernanke told a news conference after a two-day Fed meeting that the central bank expects to slow the pace of its bond purchases later this year and bring them to a halt around mid-2014. The Fed’s bond buying has largely supported commodity prices by lowering the value of the US dollar and making assets priced in the greenback cheaper for holders of other currencies. But following the latest Fed comments, the dollar has firmed, putting pressure on metals prices.
China’s benchmark money-market rate climbed to a record and a private report showed manufacturing shrank at a faster pace, spurring concerns that demand is slowing in the world’s biggest consumer of energy and metals. China’s seven-day repurchase rate, which measures interbank funding availability, rose 270 basis points, or 2.7 percentage points, to 10.77 percent in Shanghai, according to a daily fixing announced by the National Interbank Funding Center. That was the highest in data going back to March 2003. The one-day rate rose by an unprecedented 527 basis points to an all-time high of 12.85 percent, a separate fixing showed. An intra-day gauge of the one-day rate touched a record 30 percent.
“If market rates remain at such high levels, the only scenario for the Chinese economy is a hard landing,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing. “That possibility is growing now. It seems the leadership is deliberately taking a wait-and-see stance to see how low China growth can be.”