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Commodities remained under pressure despite a weekend of intervention by authorities to contain a banking crisis that saw UBS Group AG agree to buy Credit Suisse Group AG and central banks boost dollar liquidity.

Crude oil declined, failing to hold onto an early advance, while copper was flat after giving up an initial 1,2 percent gain. Gold — which had benefited from the banking turmoil with a rally toward US$2 000 an ounce last week — pared losses, suggesting that demand for havens remains a feature of trading.

After hitting a record last year following Russia’s invasion of Ukraine, the Bloomberg Commodities Spot Index has lost more than a quarter of its value as concerns over a global slowdown, higher interest rates, and a huge selloff in natural gas dragged the gauge lower. The upheaval in the banking sector — marked by the swift collapse of several US lenders and subsequent crisis at Credit Suisse — then deepened the rout, although bullion was a beneficiary.

With a crisis of confidence threatening to spread across financial markets, the Swiss government brokered the deal for Credit Suisse over the weekend, including a guarantee for potential losses from the assets UBS is taking over. The Federal Reserve and five other central banks also announced coordinated action to boost liquidity in US dollar swap arrangements.

“Participants are still not fully convinced on whether recent moves by authorities can backstop further banking fallouts,” said Yeap Jun Rong, a market strategist at IG Asia Pte in Singapore. Investors are now wondering whether to buy the dip, Yeap said. – Bloomberg

The slump in commodities has come despite China’s rapid economic revival after officials ditched the Covid Zero policy late last year. Beijing cut the amount of cash banks must keep in reserve at the central bank last week to support lending and strengthen the recovery.

The trajectory for raw materials this week will mostly hinge on how the Credit Suisse deal is received as the details are fully digested, as well as on the outcome of a Federal Reserve rate-setting meeting on Wednesday. Although US policy makers had signaled their willingness to raise rates by 50 basis points to contain still-hot inflation before the banking crisis erupted, market watchers now expect a smaller increase, or perhaps even a pause.

In their weekend statement, the Fed and partner central banks said they’ll increase the frequency of seven-day maturity operations from weekly to daily. The new arrangements will act as “an important liquidity backstop to ease strains in global funding markets,” they said.

“The UBS-Credit Suisse deal is lifting sentiment across the markets, though investors are still cautiously monitoring” the evolution of the banking crisis, Wang Rong, an analyst at Guotai Junan Futures Co., said from Shanghai.

Bloomberg