China Growth Slows Across All Fronts, Prompting Unexpected Rate Cut -- Commodities Roundup

MARKET MOVEMENTS:

--Brent crude oil fell 4.9% to $93.35 a barrel.

--European benchmark natural gas rose 3.9% to EUR221.45 a megawatt-hour.

--Gold futures fell 1.3% to $1,792.20 a troy ounce.

--Three-month LME copper prices fell 2.8% to $7,889 a metric ton.

--Wheat futures fell 2.4% to $7.87 a bushel.

TOP STORY:

China Growth Slows Across All Fronts in July, Prompting Unexpected Rate Cut

China's economy stumbled in July as a two-month boost from easing lockdowns faded, prompting the country's central bank to unexpectedly cut two key interest rates in an effort to shore up faltering growth.

A raft of data released Monday showed economic activity slowed across the board in July, including factory output, investment, consumer spending, youth hiring and real estate, highlighting the breadth of the economic challenge facing policy makers in a politically sensitive year for leader Xi Jinping, who is expected to break with recent precedent and seek a third term in power this fall.

The fresh evidence of China's slowdown adds to the headwinds facing the global economy this year, which is already reeling from the fallout from Russia's invasion of Ukraine and efforts by central banks in the U.S., Europe and beyond to tame rocketing inflation by jacking up borrowing costs.

The world's second-largest economy is straining under the effects of Beijing's zero-tolerance approach to Covid-19 and a deflating property bubble, which have triggered protests and mortgage-payment strikes in several provinces and cities. Consumers are reluctant to spend and businesses are wary of investing, a consequence of the "humongous uncertainty about the future," said Alicia García-Herrero, Asia-Pacific chief economist at investment bank Natixis in Hong Kong.

OTHER STORIES:

Rio Tinto Takeover Isn't in Best Interests of Minority Shareholders, Turquoise Hill Says

Turquoise Hill Resources Ltd. Monday said a special committee of independent directors found a takeover proposal from majority shareholder Rio Tinto PLC isn't in the best interest of the company or its minority shareholders.

Turquoise Hill, which is 51%-owned by Rio Tinto, has a 66% interest in the Oyu Tolgoi copper-gold mine in Mongolia. In March, Rio Tinto made an all-cash offer to buy the shares it doesn't hold in Turquoise Hill for 34 Canadian dollars (US$26.61) each, a 32% premium to the last closing price before the offer was announced.

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Commodity Stocks Slip Before the Bell

Shares of commodity companies are falling in premarket trading as oil and metal prices come under pressure from China's slowing economy.

Occidental Petroleum, Devon Energy, Marathon Oil, miner Freeport-McMoRan and oil-services firms Baker Hughes and Schlumberger are all down 2.5% or more.

MARKET TALKS:

Demand Concerns Weigh on Palm Oil Prices

1025 GMT - Malaysian palm-oil prices ended the day lower due to demand concerns, said Sathia Varqa, co-founder of Singapore-based Palm Oil Analytics. Profit taking after crude palm oil rose to a 1.5-month high, data showing slower Malaysian palm oil exports for the Aug. 1-15 period and worries over Chinese demand due to fresh lockdowns sparked a selloff on the FCPO market today, he said. The benchmark Bursa Malaysia Derivatives contract for October delivery closed 6.7% lower at MYR4,113 a metric ton. ([e-mail])

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Oil Drops After Weak Chinese Data

0811 GMT - Oil prices fell after a raft of Chinese data showed that economic activity in the world's largest importer of oil slowed. Brent crude fell 1.8% to $96.38 a barrel. WTI declined 1.9% to $90.35 a barrel. Retail sales and industrial production grew at a slower-than-expected rate in July, while refinery output slipped. Youth unemployment rose and average new-home prices fell. The weak data prompted China's central bank to unexpectedly cut two key interest rates in an attempt to shore up growth. ([e-mail])

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Rhine Water Levels Drop Further as European Drought Continues

0806 GMT - Water levels in Germany's Rhine river continue to fall, hampering industrial flows through the country as the continent battles a continuing drought. Levels at Kaub--a key chokepoint on the river--have fallen to 32cm, just above 2018's record low of 25cm. At this level, most barges are unable to flow without having capacity reduced significantly. The country's Federal Waterways and Shipping Administration has forecast that the river will fall to 31cm by Wednesday. With barges unable to pass, the flow of industrial goods has suffered as logistics costs rise, particularly for coal-powered plants that have traditionally imported coal via the river. ([e-mail])

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Metals Fall on Weak China Industrial Data

0717 GMT - Metals prices are down in early trading as weaker-than-expected industrial data from China pressures the global economic outlook. Three-month copper falls 1.5% to $7,990 a metric ton while nickel is down 1.2% to $27,730 a ton. Gold is also 0.5% lower at $1,807 a troy ounce. Data from China showed industrial production rose 3.8% from a year earlier in July, well short of the expected 4.5% increase. "Macro looks poor especially with this morning's China data overlapping with news of continued strike in the UK as rising cost-of-living continues to be a sore point to moot," Marex's Zenon Ho says in a note, adding that a rising dollar is only adding further pressure. ([e-mail])

Write to Will Horner at [e-mail]

(END) Dow Jones Newswires

08-15-22 0750ET