Commodities extend rout as dollar holds gains, Asian shares rise

[WELLINGTON] Commodities extended their worst monthly slump since 2011, while the dollar headed for the biggest monthly advance since January. Asian shares increased, while European equities were little changed.

The Bloomberg Commodity Index fell 0.3 per cent by 8:16 am in London, set for a decline of 10 per cent in July. The Bloomberg Dollar Spot Index was poised to gain 2.6 per cent this month as the US Federal Reserve moved closer to raising interest rates. The MSCI Asia Pacific Index rose 0.5 per cent as the Stoxx Europe 600 Index was little changed. Crude sank 1.3 per cent and gold fell 0.5 per cent.

The dollar's ascendence amid rising bets on a US rate increase in September has cascaded through financial markets, hurting commodities already in retreat on supply gluts. Emerging markets have been a chief casualty, with wild gyrations in Chinese equities dealing another blow. Developing-nation stocks are heading for their worst month since 2012 and currencies have slumped 8 per cent this year.

"The US dollar remains supported by the looming Fed tightening cycle," Imre Speizer, a senior market strategist at Westpac Banking Corp in Auckland, said by phone. "As we get closer to that date and get possible clues from speeches by officials over the next few weeks, I expect the dollar to auto- resume its upward trend."

European shares rose this week amid surging profit at companies including Deutsche Bank AG and PSA Peugeot Citroen. BNP Paribas SA, France's largest bank, swung to the highest quarterly profit in more than three years. Lloyds Banking Group Plc will consider special dividends and share buybacks after first-half profit climbed 38 per cent.

Commodity-linked currencies have borne the worst losses against the dollar in July, with Brazil's real, the Australian dollar, Canada's loonie and the South African rand among the five biggest decliners, down at least 4 per cent. The euro emerged from the Greek crisis with a 1.9 per cent drop, while the pound performed best among 16 peers, slipping 0.7 per cent.

The Bloomberg Commodity Index dropped to a 13-year low this week. West Texas Intermediate oil slumped 19 per cent this month, its worst performance since December, while gold fell 7.6 per cent, set for its biggest drop since 2013 after declining to a five-year low. Copper slid 9 per cent in July.

Emerging-market stocks are heading for their biggest drop in any month since 2012. The Shanghai Composite Index has tumbled 14 per cent, the biggest loss among 93 global benchmark gauges tracked by Bloomberg, as margin traders cashed out and new equity-account openings tumbled amid a US$3.5 trillion rout.

While China concerns contributed to losses in Asian equities in July, better-than-expected profits in the US helped boost the Standard & Poor's 500 Index by 2.2 per cent. The MSCI All-Country World Index has gained 0.5 per cent. An update on euro-area consumer prices is due Friday.

Japan's Topix index capped an increase in July as investors watched quarterly results from more than 300 companies. Honda Motor Co reported profit that beat analyst estimates as gains in China overshadowed a rise in recall-related expenses. Net income rose to 186 billion yen (US$1.5 billion) in the quarter ended June, the company said.

Shares of Noble Group Ltd slumped 15 per cent in Singapore to the lowest level since 2008. The stock has lost more than 60 per cent since the middle of February when a group calling itself Iceberg Research published criticism of its accounting, which the firm has rejected.

US gross domestic product rose at a 2.3 per cent annualized rate in the second quarter, the Commerce Department said Thursday, after a previously reported contraction for the first three months was revised to a 0.6 per cent gain. The median forecast of 80 economists called for a 2.5 per cent advance.

Fed Chair Janet Yellen is guiding the central bank toward its first rate increase in almost a decade as the US approaches full employment. The Fed said in a statement Wednesday that it will tighten monetary policy once it sees "some further improvement in the labour market." Economists have put the chance of a rate increase at the Fed's September meeting at 50 per cent.

BLOOMBERG