Oil extends drop amid commodity selloff; most Asian futures rise

[WELLINGTON] Crude oil fell for a fifth day, extending losses amid a commodities rout fueled by dollar gains that sent gold sliding to a five-year low. Most Asian index futures rose.

West Texas Intermediate oil fell 0.3 per cent to US$50 a barrel by 8.09 am in Tokyo, extending declines at a more-than three-month low. Gold futures for August delivery slipped another 0.8 per cent to US$1,097.50 an ounce in early trading, as the greenback held near its strongest level since April against the euro. Standard & Poor's 500 Index futures dropped 0.1 per cent following a mixed day for US stocks, while contracts on Australian and South Korean equity indexes advanced.

The outlook for precious metals and oil has soured as investors refocus on US monetary policy, with bets that the Federal Reserve is moving closer to boosting interest rates fueling a resurgence in the dollar. Gold slid the most in two years during 15 minutes of Asian trading Monday, while producers of the metal sank to multi year lows. Japanese markets resume on Tuesday following a holiday, with the central bank to publish June meeting minutes.

"Irrespective of whether weaker Chinese demand or the prospect of the Fed raising rates is the primary catalyst, what is becoming increasingly apparent is that commodity prices have been on the skids," Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand, wrote in a client note.

Futures denominated in yen on Japan's Nikkei 225 Stock Average dropped 0.2 per cent to 20,755 in Chicago, after adding 0.4 per cent in the last session. The yen was little changed at 124.28 per dollar following Monday's 0.2 per cent retreat.

Chinese Futures Contracts on Australia's S&P/ASX 200 Index and the Kospi index in Seoul gained 0.2 per cent, while futures on the FTSE China A50 Index, which tracks the biggest stocks in mainland markets, climbed 0.5 per cent in recent Singapore trading. Futures on China's CSI 300 Index dropped 3.3 per cent, and contracts on the Hang Seng China Enterprises Index, a gauge of mainland shares listed in Hong Kong, rose less than 0.1 per cent.

Chinese stocks climbed Monday, easing concern over the stock rout there. The Shanghai Composite Index added 0.9 per cent in a third day of gains, extending last week's 2.1 per cent rebound.

The Bloomberg Commodity Index slid to a 13-year low on Monday, and mining stocks drove equity losses around the world, with selling heaviest among emerging-market resource producers. AngloGold Ashanti Ltd. tumbled to a record low in Johannesburg and Canada's Barrick Gold Corp. hit levels last seen in 1990.

"We've seen a resumption of a rally in the dollar, and if you do the math, that's bad for commodity prices," said Peter Sorrentino, a Cincinnati-based fund manager at Huntington Asset Advisors, which oversees US$1.8 billion. "The implications there for the hard-asset part of the global economy is pretty abysmal looking out to the rest of the year." The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, was little changed after rising for a fourth straight day on Monday, adding 0.2 per cent to its highest level since March.

BLOOMBERG