Commodity woes cause global stocks to slid to two-year low

The pressure on commodities and emerging markets worsened on Tuesday (September 29th), pushing global stocks down to their lowest levels in more than two years.

Despite prices for raw materials inching up slightly, they still hovered near multi-year lows on the back of worries about China's slowing economy.  

Commodity trading and mining company Glencore scraped gains of four per cent, after shares plummeted by almost one-third in the previous session, as investors are concerned with the firm's level of debt. Its Hong kong listed shares tumbled by 29 per cent.

Noble, an Asian commodity merchant, shaved 11 per cent off share prices, clawing back some of the 15 per cent it lost earlier in the session.

While some European shares were able to recover some of the losses they made, major indices still remain perilously close to 2015 lows.

Conversely, US stocks opened higher on Tuesday, recouping some of value shed on Monday due to a sell-off in shares of biotech and raw materials producers. The Dow Jones industrial average was up 29.23 points, equal to 0.18 per cent, at 16,031.12, while the S&P 500 gained 4.11 points, or 0.22 per cent, at 1,885.88. The Nasdaq composite added 11.08 points, or 0.24 percent, at 4,555.04.

Earlier in the trading session, Asian shares slipped down to three-and-a-half year lows on the back of concerns that the slowing economy in China will massively impact demand for commodities - with the country being the world's largest consumer of several raw materials, including aluminum and iron ore.

Emerging equities slipped by 0.8 per cent, while sovereign dollar bond yields spreads surged to six-and-a-half year highs in the wake of investor worries concerning the creditworthiness of the countries and companies exporting commodities.

Retreating from a one-month low, copper regained 0.3 per cent, taking its price per tonne to $4,919, hovering just above a six-and-a-half year nadir of $4,855.

Platinum sank to below $900 per ounce for the first time in six years, amid concerns that the Volkswagen emissions scandal could restrict demand from carmakers. Gold lost 0.4 per cent, slipping to $1,126 an ounce due to worries about the Federal Reserve pulling the trigger and raising interest rates this year.

The pan-European FTSEurofirst 300 index lost 0.3 per cent, lead by biotech firms, which were also responsible for weighing the Nasdaq down on Monday.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 1.8 per cent, recovering slightly from the three-year lows it hit earlier in the trading session. MSCI's all-country index of world shares shaved 0.5 per cent, slipping to its lowest since September 2013. Japan's Nikkei lost four per cent, pushing it down to an eight-month low and leading it to turn negative for 2015.

The Australian dollar, which is closely linked to commodities, hovered above a six-and-a-half year low before regaining some ground, while its Canadian counterpart tumbled to an 11-year nadir.

Data revealing that Spanish consumer prices fell at their fastest rate in seven months and information suggesting inflation in Germany is zero pushed the euro down 0.2 per cent to $1.1276.  

Petr Krpata, FX strategist at ING, told Reuters: "If euro zone inflation prints below market consensus tomorrow, expectations of more asset purchases from the European Central Bank (ECB) will be boosted. The uncertainty about more quantitative easing by the ECB is not good for the euro."

Meanwhile, the US dollar made slight gains against its major peers on the back of predictions that the latest market turmoil could lead the Federal Reserve to delay raising interest rates into 2016. Since the bank announced its decision to leave rates unchanged on September 17th, markets have been unable to agree when the Fed will pull the trigger.

Brent crude added 47 cents to the cost of a barrel, taking the price to $47.81, as investor confidence was boosted by signs that the US market could be tightening.