China's official PMI for July slows to its weakest in 2 years
Prices of key commodities fell further in intraday trade on Monday as gloomy data on Chinese manufacturing spooked the markets and further reinforced fears about the appetite of the world’s top commodity consumer. Copper and aluminium hit their lowest in more than six years, Brent crude oil dropped to a fresh six-month low and gold dipped further.
The final Caixin China Purchasing Managers’ Index (PMI) for July revealed manufacturing in the world’s second-largest economy slowed to its weakest in two years, further dampening sentiments. Even the official PMI stood at 50.0 in July, against 50.2 in the previous month. The 50-point mark separates growth from contraction. Although China’s statistics bureau said the weaker reading was partly due to hot temperatures and heavy rain that led some companies to cut production and carry out maintenance, there were few takers for this in the commodity markets.
Three-month copper on the London Metal Exchange lost 1.7% to $5,142 a tonne intraday, its lowest since July 2009. The metal was trading at $5,161 at 0942 GMT from $5,230 at Friday’s close.
Three-month aluminium hit $1,601.50 a tonne in intraday trade on the LME, recording an over 20% crash since early May. The base metal, however, clawed back some gains and was trading at $1,611 per tonne at 0942 GMT, still lower than $1,618 on Friday.
Brent crude oil hit as low as $50.85 a barrel intraday, its meanest since January 30. Brent has lost almost 20% since July.
The fall was also aided by fresh data on a swelling glut in times of slowing Chinese demand. According to a suvey by Reuters last week, oil output by the Organization of the Petroleum Exporting Countries (OPEC) reached the highest monthly level in recent history in July.
Spot gold shed 0.3% to $1,093 an ounce, having crashed by the most in two years in July. The expectations that the US Federal Reserve would raise the interest rates this year, the first time in a decade, have been driving up the dollar against a basket of currencies over the past few days. This has raised the lure of other competing investment products and also reduced fears of inflation, giving a blow to gold’s appeal as a hedge against price rise.