For those with an interest in commodities, recent news has been focused on one topic: the Evergrande crisis. The Chinese real estate giant has found itself increasingly strapped for cash, and this has had a knock-on effect across the globe.
With commodities including iron ore and copper taking a hit, there was real concern about the impact on the financial markets. Thankfully, however, the property developer has revealed it’s now managed to “resolve” an interest payment that had come due on one of its bonds.
This has eased concern among investors, with commodities now showing signs of rebounding. The burgeoning crisis has also been held at bay by an unexpected decline in US crude inventories, fueling a buying spree that’s helped to further prop up the market.
We take a look at what this means for commodities moving forward.
A welcome upturn
Source: Pixabay
For those who trade commodities, the markets have proved volatile of late. That’s because global events have a knock-on impact on their value, as recently evidenced by the Evergrande crisis. While this isn’t necessarily a bad thing, presenting opportunities for the bold to buy while prices are low, it’s nonetheless made for some interesting viewing.
Now, however, those who held their nerve are profiting from doing so, with the Bloomberg Commodity Index rising by 1.4 percent on Wednesday. This marked the first upturn following four days of declines.
The Bloomberg Commodity Index tracks 23 raw materials, including oil and gasoline. It was these fossil fuels that gained the most over the week, though copper, agricultural markets, and various other base metals also experienced growth.
A payment met
As we mentioned, the downturn that occurred earlier in the week stemmed from fears that real-estate leviathan Evergrande was about to default on an interest payment. This sent shockwaves across several financial markets, with concerns over the broader economic impact this might have both within China and overseas.
The reason this affected the commodity markets to such a marked extent was because China is the world’s biggest buyer of raw materials. Any downturn in its economic performance can therefore affect commodity purchasing worldwide.
Thankfully, though, these fears went largely unrealized, with the real-estate developer now having reached an agreement to settle its outstanding debt.
Crude oil in high demand
Source: Pixabay
This upturn in the markets has also been supported by a larger than expected reduction in crude inventories in the US. This has only exacerbated concerns surrounding Europe’s gas shortage, which has caused an unparalleled increase in prices.
As a result, the value of crude has risen exponentially, with a single barrel expected to be worth upwards of $90 by winter. Demand will be especially high in the event of a cold snap. This means that, for anyone considering their next investment, oil and gas seem like sure bets.
Despite drops earlier in the week, it appears the commodities markets are now stronger than ever. In light of this, will you be looking to make any new additions to your portfolio?
