Username
Password
Forget Password?
  1. Indices
  2. Commodities
  3. Currencies
Straits Times 3,200.28 +17.36 +0.55%
Hang Seng 28,566.91 +43.56 +0.15%
Dow Jones 25,585.53 +68.70 +0.27%
Shanghai Composite 2,997.10 -45.94 -1.51%
Here’s What’s Really Driving the Commodity Index Lower
Aspire, Investments | 23 July 2015

Clearly it hasn’t been commodities’ week, month or year. But focusing on the worst-performers doesn’t tell the full story.

The Bloomberg Commodity Index fell 7.2 percent this month, touching a 13-year low on June 20. The biggest losers are crops such as coffee and sugar, each down 27 percent. They’ve fallen because of a weak currency in the most important producer, Brazil, and abundant inventories after years of surpluses, according to Commerzbank. (They’re also very weather-driven.)

But those aren’t actually the reasons driving down the whole index. The biggest contributor to the index’s decline has been industrial metals such as copper and nickel, down 12 percent and 23 percent this year, respectively. They’re falling because of concerns that the tumbling Chinese stock market betrays sapping demand from the world’s biggest consumer.

What’s behind the discrepancy? More valuable commodities like oil and gold (down 12 percent and 6.8 percent) have heavier weightings in the index (and most exchange-traded products and other portfolios). As it happens, there’s a lot of overlap between the smallest members and the biggest nominal declines.

To contact the author on this story: Isaac Arnsdorf at iarnsdorf@bloomberg.net

To contact the editor on this story: David Marino at dmarino4@bloomberg.net


Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

All Rights Reserved. Pioneers & Leaders (Publishers) Pte Ltd. Best viewed with Mozilla Firefox 3.5 and above.