By Naveen Thukral, Emily Chow and Nina Chestney
SINGAPORE/LONDON (Reuters) -Commodities from oil and gasoline to metals and grains dropped on Wednesday because the greenback rallied and victory for Republican Donald Trump within the U.S. presidential election stoked issues about tariffs and financial development.
Trump recaptured the White Home by securing greater than the 270 Electoral Faculty votes wanted to win the presidency, following a marketing campaign of darkish rhetoric that deepened the polarization within the nation.
Oil costs fell by greater than 1% on strain from the U.S. greenback rally, which was set for its greatest one-day rise since March 2023 in opposition to main friends. [USD/]
Traders consider Trump’s presidency will bolster the greenback as rates of interest may have to stay excessive to fight inflation that will stem from new tariffs.
A stronger U.S. greenback makes greenback-denominated commodities reminiscent of oil dearer for holders of different currencies.
Valuable metals additionally fell, with gold sliding to a close to three-week low, whereas misplaced greater than 2%, making it the worst performer of the bottom metals advanced.
“Gold will be torn between the risk of rising inflation, potentially slowing the pace of U.S. rate cuts, as tariffs are rolled out and continued demand for safe haven assets,” Ole Hansen, head of commodity technique at Saxo Financial institution, stated.
Commodity costs began to fall in a single day as merchants began to cost within the probability of a Trump win.
“This scenario is expected to bring about the promised tariffs on imported goods, particularly targeting China, potentially triggering a new wave of trade tensions and economic disruptions,” Hansen added.
Nonetheless, Trump might renew sanctions on Iran and Venezuela, eradicating oil barrels from the market, which might be bullish, stated UBS analyst Giovanni Staunovo. Iran exports about 1.3 million barrels per day.
Benchmark European gasoline costs additionally fell by almost 3% amid issues about gasoline provides and Trump’s stance on the Center East battle and Russia-Ukraine warfare.
China’s industrial metals and metal industries might face headwinds as Trump has pledged to impose blanket 60% tariffs on Chinese language items to spice up U.S. manufacturing.
“China’s steel prices will undertake more downward pressure if Trump wins the election, and domestic steelmakers may face even more severe losses,” stated Ge Xin, deputy director at Lange Metal Analysis Centre.
“This is because Trump will be more aggressive in terms of measures against China.”
The copper market was pricing within the doable roll-back of U.S. electrification initiatives, together with subsidies for electrical automobiles, which might dampen demand.
Agricultural commodities had been additionally hit, with soybean futures specifically buying and selling decrease. Wheat and corn had been seen as much less uncovered to renewed commerce tensions with China.
A stronger greenback makes U.S. grain dearer abroad, whereas tariffs proposed by Trump might disrupt U.S. agricultural commerce, with soybeans notably reliant on gross sales to main importer China.
There are additionally fears that China might reply with retaliatory measures, doubtlessly decreasing U.S. exports of key crops and creating downward strain on costs.
Shares in European clear power firms additionally fell as Trump has vowed to scrap offshore wind tasks by an govt order on his first day in workplace.
