Commodities clobbered as dollar bulldozes higher

LONDON, (Reuters): Commodity markets were clobbered and stocks and bonds were also in the firing line on Monday as expectations for a first increase in US interest rates next month in almost a decade pushed the dollar to a seven-month high.

Oil fell more than 3% and industrial metals copper and nickel plunged, while the euro sagged to a seven-month low as the prospect of more policy easing by the ECB in Europe was compounded by a security lockdown in Brussels.

European stocks were down 0.5% despite better-than-expected euro zone data as the slump in commodities and the unrelenting appreciation of the dollar dominated sentiment at the start of the week.

Copper slumped to a fresh six-and-a-half year low and nickel tumbled 4% to its lowest since 2003 as traders bet metals prices still had further to fall, given slowing factory demand in China.

People walk through the lobby of the London Stock Exchange in London, Britain - REUTERS

Oil prices sank again, with US crude off $1.30 or 3% at $40.60 a barrel. Brent lost 90 cents or 2% to $43.80.

That sent commodity-linked currencies like the Russian rouble tumbling and even safe-haven gold was not immune as it hovered around $1,070.56 an ounce, having touched its lowest level in nearly six years.

“The biggest factor here is the dollar,” said an ABN Amro senior energy economist Hans van Cleef, in Amsterdam. “It is having an impact on all major commodities at the moment.”

“More and more investors are watching it (commodities sell-off) and sentiment therefore gets more jittery.”