European stock markets push higher as commodity prices slump

SUZHOU, CHINA - DECEMBER 9, 2020 - Aerial photo taken on December 9, 2020 shows a ship unloader unloading iron ore imported from Australia at an iron ore operation terminal in Taicang Port in Suzhou, East China's Jiangsu Province, China.- PHOTOGRAPH BY Costfoto / Barcroft Studios / Future Publishing (Photo credit should read Costfoto/Barcroft Media via Getty Images)

China’s most-traded iron ore futures contract in Dalian extended loss to more than 9% on the back of the news, while iron ore for September delivery slid as much as 9.5%. Photo: Costfoto/Barcroft Media via Getty Images

Stocks in Europe pushed higher at the open on Monday despite a sharp fall in commodity prices and an unsteady weekend for cryptocurrencies.

In London, the FTSE 100 (^FTSE) rose 0.2% after opening, while the CAC (^FCHI) jumped 0.7% in France.

The German DAX (^GDAXI) was closed for Whit Monday. Today is set to be a quieter trading day in Europe as markets in Switzerland, Denmark, Norway, Belgium and Austria are similarly closed for the public holiday.

Commodity prices suffered on Monday after China announced a new crackdown on ‘speculators and hoarders’ to deflate the boom in raw materials.

China’s National Development and Reform Commission (CNDR) issued a stern warning against commodity price manipulation, vowing to show “zero tolerance” for monopolies in the markets.

“This round of price increases is the result of multiple factors, including international transmission but also have many aspects reflecting over-speculation,” it said.

China’s most-traded iron ore futures contract in Dalian extended loss to more than 9% on the back of the news, while iron ore for September delivery slid as much as 9.5%.

Steel and copper prices have also tumbled.

Watch: Iron ore rally stutters as China seeks control

“There is increasing evidence of blockages in the economy as the strength of demand outpaces available supply,” Richard Hunter, head of markets at Interactive Investor, said. “Whether this be raw materials or labour, the pressures are clearly inflationary.”

“The question which is currently perplexing investors is whether this is a temporary effect as supply catches up with demand quickly, or whether there are wider factors at play, such as higher prices given the current trend towards deglobalisation, exacerbated by the pandemic.”

On Wall Street, S&P 500 futures (ES=F) were up 0.3%, Dow futures (YM=F) climbed 0.4%, and Nasdaq futures (NQ=F) were 0.2% higher as trade began in Europe.

Last week, the Dow (^DJI) posted its fourth negative week in five, while the S&P 500 (^GSPC) registered two straight weeks of losses for the first time since February. The Nasdaq Composite (^IXIC), meanwhile, gained 0.31%, breaking a four-week losing streak.

Read more: Bitcoin continues downward spiral after volatile week that crashed crypto market

Asian shares opened cautiously on Monday and later closed mixed as investors awaited key US inflation readings for guidance on monetary policy.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped in slow trade. The Nikkei (^N225) climbed 0.2% while the Hang Seng (^HSI) fell 0.3% and the Shanghai Composite (000001.SS) advanced 0.3%.

Bitcoin (BTC-USD) also tried to stabilise after being hammered over the weekend on news of China’s crackdown on mining and trading of the cryptocurrency.

Bitcoin dipped as much as 14.5% to $ 33,038 (£23,347) while other currencies followed a similar trajectory. Ethereum (ETH-USD), the world’s second largest crypto, crashed 23% to trade at $ 1,901, and dogecoin (DOGE-USD) fell as much as 20% to $ 0.28 during the session.

Kyle Rodda of IG said: “After a brief bounce off last week’s multi-month lows, some of the paper-handed types have seemingly sold-out just passed their breakeven, or decided to pack it in and cut their losses, as Bitcoin’s momentum, and the speculative mania that drove it, almost entirely disappears.”

Watch: What are the risks of investing in cryptocurrency?