Aussie hits 2020 levels as commodities, stocks plummet

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Block plunged 10.6 per cent to $119.80 and Rio Tinto dived 6.5 per cent to $99.82. BHP Group was down almost 4 per cent to $44.46.

Tesla halted output at its Shanghai plant due to supply issues, Reuters reported.

The Australian dollar slumped 1.8 per cent to a low of US69.45¢, its weakest level against the greenback dating back to the pandemic, in July 2020. The US dollar index continues to rally on its safe haven appeal, hovering near a 20-year high.

“The ongoing theme of mounting growth concerns against a backdrop of central bank tightening is continuing to drive market movements,” said Taylor Nugent, market economist at National Australia Bank.

Commodity sell-off

Mounting evidence of an economic slowdown in China has coincided with stricter lockdowns in the world’s second largest economy, adding to investors’ trepidation about the sustainability of commodity prices.

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Shanghai has ordered residents to return to their homes and banned food deliveries for the next week following orders from President Xi Jinping to double-down on efforts to eliminate COVID-19, regardless of the economic and social costs.

The toll of the country’s zero-COVID-19 strategy was evident in customs data released on Monday, which showed that China’s export growth in April weakened to its slowest pace since June 2020.

New home sales were also weaker, despite policymakers promising to support the struggling property market.

“The weak data highlights stimulus efforts announced to date have so far failed to reboot China’s property market and broader economy while continuing to battle the ongoing COVID-19 outbreak, raising market concerns around forward growth expectations,” said Baden Moore, head of commodities research at National Australia Bank.

The price of iron ore traded in the spot market dived 5.5 per cent to $US131.35 a tonne on the news on Monday, while the June contract traded on the Singapore exchange dropped to a three-month low of $US126.90 on Tuesday.

Base metals also extended their decline, with copper down 1.9 per cent to $US9238 per tonne – its lowest level since mid-December. Nickel dropped 6.9 per cent to $US28,000 per tonne and aluminium was down 3.2 per cent to $US2719 per tonne.

Oil prices also fell sharply due to a combination of weak demand from China and reports of a possible softening of European sanctions on Russian energy exports.

West Texas Intermediate fell below $US103 a barrel after sliding 5.5 per cent to $US103.28 a barrel overnight. Brent crude dropped 5.9 per cent to $US106.19 a barrel.

The European Union will scrap its proposed ban on EU-owned vessels transporting Russian crude following objections from members including Greece, Bloomberg reported. The EU is still debating a sixth package of sanctions on Russia, with diplomats trying to overcome objections from Hungary to a proposed ban on Russian crude.