Commodities come under pressure as stocks slide on US economic worries
Oil down 2% after earlier support from Middle East tension
Copper sheds early gains from growth in China services activity
Softer U.S. data may make central bank rate cuts easier
By Naveen Thukral
SINGAPORE, Aug 5 (Reuters) -Commodities including oil and copper joined in Monday's selloff in global stocks as growing fears of a U.S. recession stoked worries over demand, even as fundamental drivers provided support for some raw materials.
Crude oil eased in volatile trade that was supported by rising Middle East tensions, while copper lost gains earlier in the day from data showing growth in China's service activity, with both commodities down around 2%.
Commodities had already taken a hit in recent weeks, weighed down by the sluggish economy in top commodities buyer China, with crude oil down around 5% last week, copper hitting a four-month low on the London Metal Exchange, and corn near its weakest since 2020.
"Oil has done a lot already, particularly after Friday's sell-off. And obviously on the energy side we still have this geopolitical risk hanging over the market, waiting to see what action Iran takes if any," Warren Patterson, ING's head of commodities research, said.
"Metals may be getting relatively more support from policy with the consumption push."
Middle East tensions curbed losses in the oil market, with Israel and the U.S. bracing for a serious escalation in the region after Iran and its allies Hamas and Hezbollah pledged to retaliate against Israel for last week's killings of Hamas's leader and a top Hezbollah military commander.
Guy Wolf, global head of market analytics at Marex, said softer U.S. data could help markets by making it easier for central banks to cut rates, although a hard landing would ultimately hit demand.
"If you look at the Chinese data, domestically it is soft and exports are struck, so if the rest of the world weakens ... it is clearly going to be negative for base metals," he said.
Still, he said declines for metals should be limited by supply disruptions and demand from new energy sectors.
Growth in China's services activity accelerated in July, helped by new orders, although momentum in overseas demand eased to its slowest in 11 months, a private sector survey showed.
China should ramp up its fiscal stimulus to spur economic growth and set a firm inflation target to prevent the country falling into a "low inflation trap", a central bank policy adviser said in remarks seen on Friday.
In the agricultural market, Japanese rubber futures JRUc6 hit a more than one-week high on Monda, buoyed by adverse weather in top producer Thailand, before the market gave up gains.
Corn Cv1 and soybeans Sv1 languished near four-year lows on expectations of bumper U.S. output. Wheat Wv1 fell 1.7% amid plentiful global supplies. GRA/
Reporting by Naveen Thukral; Additional reporting by Florence Tan and Mai Nguyen; Editing by Jan Harvey
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