+++ (BBG) Commodities Dragged Into Global Selloff as Oil to Copper Get Hit

(Bloomberg) — Commodities from crude oil to metals and
iron ore dropped as the global equity rout and surge in market
volatility spurred investors to pare risk, cutting positions in
raw materials even as banks and analysts stood by the asset
class given the backdrop of solid global growth.
Brent crude slid as much as 1.2 percent to $66.82 a barrel,
heading for a third daily drop and the longest losing run since
November. On the London Metal Exchange, copper sank as much as 2
percent to $7,025 a metric ton as zinc, lead and nickel
declined. Iron ore futures fell 1.2 percent in Singapore.
Global equity markets are in retreat after Wall Street
losses that began in the final session of last week worsened on
Monday, with the Dow Jones Industrial Average posting its
biggest intraday point drop in history. The selloff — triggered
in part by an initial rise in bond yields and concerns about the
pace at which the Federal Reserve will raise interest rates —
is spilling into commodities, which rallied in late January to
the highest level since 2015. Still, Citigroup Inc. said now’s
the time for investors to add positions in metals.
“Clearly there is a risk off tone in the markets that will
weigh on the sector,” said Daniel Hynes, a senior commodities
strategist at Australia & New Zealand Banking Group. “But there
is no fundamental reason for this selloff to change our view of
commodity markets.”

BHP Drops

Miners and energy companies fell as share benchmarks
spiraled downward. In the U.S. on Monday, Exxon Mobil Corp. and
Chevron Corp. were among the worst performers in the Dow. In
Sydney, BHP Billiton Ltd., the world’s largest mining company,
dropped 2.7 percent as Rio Tinto Group traded lower. Oil
producer PetroChina Co. lost as much as 7.3 percent in Hong
Kong.
Gold, often seen as a haven in times of turbulence, has so
far failed to push much higher. Bullion for immediate delivery
added 0.3 percent to $1,343.08 an ounce at 5:48 a.m. in
Singapore after rising 0.5 percent on Monday.
Vitol Group, the world’s top independent energy trader,
signaled — in comments released on Tuesday — that the crude
market looks solid after OPEC and allies showed better-than-
expected compliance with supply cuts and cold weather aided
demand. “We always look at the oil fundamentals: they are
absolutely fine,” Chief Executive Officer Ian Taylor told
Bloomberg TV.
Citi’s case for metals rested on its analysis they do
better than other assets during periods of solid growth when
inflation is picking up. “Global growth is synchronized, solid,
and forecast to accelerate, output gaps are closing and risks to
inflation are skewed to the upside,” it said in the Feb. 5
report.
“The recent selloff in rates and equities, and spike in
VIX, presents an opportunity to rotate into industrial metals,”
the bank said in a report. “We recommend asset managers raise
their exposure to industrial metals over the coming month,
particularly at the expense of bonds and other fixed income.”
There was similar sentiment from other analysts that the
broader picture remains supportive of commodities, echoing
January remarks from billionaire bond manager Jeffrey Gundlach
that raw materials may be one of this year’s best investments as
they surge during the late phase of the economic cycle.
“The drop in U.S. equities market is currently dragging
prices of commodities down,” said Will Yun, a Seoul-based
commodities analyst at Hyundai Futures Corp. “However, it’d be
too early to say commodities have joined the global selloff
because the fundamental picture is still looking positive.”