Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Chinese Selloff Contributes To Commodities Rout

Published 07/13/2015, 01:25 AM
Updated 05/14/2017, 06:45 AM

The bear market in China is roaring.

Since the bull market peaked on June 12, the Shanghai Composite has tumbled over 30%. This is the worst three-week posting for the index since 1992.

Nearly $2.5 trillion in market value was wiped out!

The sudden, sharp decline in stocks is now calling into question Chinese economic growth. And its voracious appetite for all sorts of commodities.

Of course, demand from China was already coming into question as the country’s steel production in the first quarter declined for the first time in 20 years.

It’s this questioning of the whole China-commodities equation that led to the S&P GSCI EUR TR Index falling to the lowest level since April. The July 7 drop was also the steepest one-day decline since November.

Dropping Down the Rout

The actual numbers are not pretty.

An index of base metals traded in London hit its lowest level since 2009. The worst among the base metals were copper, which went down over 4%, and nickel, which fell nearly 7%.

It wasn’t much prettier in the precious metals markets. Gold went down 2% and hit a 15-week low. Silver tanked by 6%.

The oil bulls also got hit, with crude posting its steepest loss in three months on Monday. West Texas Intermediate finished at $52.53. Oil neared bear market territory Tuesday before recording a bit of a rebound.

Worry Tanks Commodity Markets

China’s Gluttony

For decades now, China has been the 800-pound gorilla in many commodities markets. The country is considered the father of the commodity supercycle.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

China’s share of the world’s metals market grew from just 12% in 2000 to about 50% today. The rise was led by iron ore. Demand for the metal rose a whopping five-fold.

The chart below gives just a small indication of China’s impact.

The Insatiable Chinese Appetite

The only question now is whether this gorilla, with a huge appetite, will go on a diet?

And the chase continues,

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.