Commodities suffer as Fed indicates plans to pull back stimulus and China growth slows — Market React

Commodities came under pressure today after minutes from the July Federal Reserve meeting released yesterday indicated that it will start slowing the pace of its bond buying program later this year. Further weighing on the space were reports this week on China’s slowing economic growth, driven partly by the spread of the delta variant. 

Oil prices fell to the lowest level since May. WTI dropped to USD 62.97 per barrel this morning, down 3.77% from yesterday’s close and down from a recent high of USD 75.25 in July. Brent crude traded today at USD 66.11 per barrel, 3.11% weaker than yesterday and down from a recent high of USD 77.16 in July. 

In July, China’s retail sales were hit by new virus restrictions to contain new outbreaks. In tandem, flooding and microchip shortage hindered manufacturing sales, while a weaker property market and environmental policies impacted steel and cement output. 

The country’s refinery output also fell to the lowest level in more than a year. 

For July, retail sales rose 8.5% year-over-year, compared to a median estimate of 10.9%. Industrial production increased 6.4% on the year, compared to a median estimate of 7.9%. Steel production hit a 15-month low in July, while cement production fell for the third consecutive month. 

With a host of supply chain delays and issues compounded by the continuing microchip shortage, large car manufacturers such as FordToyota and Volkswagen continue to scale back production. 

Ford announced that it is shutting down an F-150 plant, while Toyota plans to cut its September production plan by 40%. Volkswagen said that it expects chip supply in 3Q21 to be volatile and it may need to further cut output due to the shortage. 

Ford’s equity traded today at USD 12.65 per share and a market cap of USD 50.494bn, down 2.73% from yesterday’s close. 

Toyota’s equity slipped to USD 169.53 per share and a market cap of USD 238.652bn, down 3.53% from yesterday’s close. 

Volkswagen’s equity, meanwhile dipped to USD 32.90 per share and a market cap of USD 164.926bn, down 3.29% from yesterday’s close. 

Amid the commodity slump, stocks and bonds of copper and gold mining company Freeport-McMoRan and steel producer US Steel weakened today. 

Freeport’s USD 700m 4.125% senior unsecured notes due 2028 traded today at 103.75 to yield 2.923%, compared to trades at 104.875 to yield 2.201% yesterday (18 August), according to MarketAxess. 

Its equity traded today at USD 31.83 per share and a market cap of USD 46.736bn, down 6.07% from yesterday’s close. 

US Steel’s USD 750m 6.875% senior unsecured notes due 2029 traded today at 107.91 to yield 4.805%, compared to trades at 108.875 to yield 4.427% yesterday (18 August), according to MarketAxess. 

The equity traded today at USD 27.13 per share and a market cap of USD 7.329bn, down 7.88% from yesterday’s close. 

Bellwether E&Ps including Occidental PetroleumDevon Energy and Continental Resources softened across the board this morning as well. 

Occidental Petroleum’s USD 1.5bn 3.5% senior unsecured notes due 2029 traded today at 99.07 to yield 3.635%, compared to trades yesterday at par, according to MarketAxess. 

Its USD 750m 4.3% senior unsecured notes due 2039 traded today at 97 to yield 4.546%, compared to trades at 98.485 to yield 4.423% yesterday, according to MarketAxess. 

Its equity traded today at USD 22.26 per share and a market cap of USD 20.788bn, down 5.03% from yesterday’s close. 

Devon Energy’s USD 750m 5% senior unsecured notes due 2045 slid to 116.142 to yield 3.935% today compared to 117.097 to yield 3.879% on 17 August, according to MarketAxess. 

Its equity declined to USD 24.64 per share and a market cap of USD 16.688bn today, marking a 5.76% drop from yesterday’s close. 

Continental’s USD 1bn 4.375% senior unsecured notes due 2028 traded today at 110.272 to yield 2.558%, compared to trades at 111.75 to yield 4.091% yesterday (18 August), according to MarketAxess. 

The equity traded today at USD 32.65 per share and a market cap of USD 12bn, down 4.38% from yesterday’s close. 

2021 Debtwire

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