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Commodities tumble; stocks, dollar gain

Oil falls to three-month low of USD 118.

LONDON - Oil and commodity prices tumbled on Tuesday as concerns grew that slowing global economic growth could reduce demand, while easing inflation concerns and better-than-expected European bank results lifted world shares. The dollar hit a seven-week high against major currencies as investors bet that easing inflation pressures would enable other central banks to cut interest rates, narrowing yield differentials in the U.S. currency’s favour. Benchmark oil prices fell to a three-month low below USD118 a barrel at one point, falling USD 28 from July’s record highs.

The loss extends a slide from the July 11 record high of USD 147.27 a barrel, despite a Gulf of Mexico storm that has curbed oil output, and is prompting some to say that oil’s rally has run its course for now. “Most of the hedge funds have been taking profits,” said Angus McPhail of British-based investment firm Alliance Trust. Asked how far prices could fall, he said: “Probably to about USD 100 within the next month if you keep on getting weak demand data.” U.S. crude was down USD 2.28 at USD 119.13 a barrel by 0930 GMT and fell as far as USD 118.00, the lowest price since May 5. London Brent crude shed USD 2.20 to USD 118.48.

Other commodity prices fell in tandem. Gold hit a six-week low, platinum dropped to six-month troughs and soybeans hit their weakest in three months.

“The sentiment is more bearish now than before as concern over slower U.S. economic growth is (weighing on) demand,” said David Moore, commodity strategist at Commonwealth Bank of Australia. U.S. crude was down 1.5 percent at USD 119.54 a barrel. Gold fell to USD 882.10. Tuesday’s fall came after broader commodity prices posted their biggest monthly drop in at least 10 years in July. Tumbling commodities had a mixed effect on equities. Societe Generale posted a 63 percent fall in second-quarter net profit, smaller than many had feared. The key event of the day is an interest rate decision by the Federal Reserve. The Fed is likely to leave interest rates on hold at 2.00 percent until December when investors expect the central bank to hike the cost of borrowing.

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