Commodities gave important signals in April/May. The performance of commodity markets has a heavy impact on the price movements on any industrial metal. If you are a metal buyer, it doesn’t matter if you buy aluminum, copper, steel or tin. The information in this article is important for you.
About a month ago I noted that while industrial metals were on the rise, commodities were range-bound, a sign of sluggish global demand. As I had written, “a healthy bull market in base metals should be accompanied by a bull market in other commodity markets.” Commodities not only have struggled to make new headway but in the past few days they weakened significantly. Recent moves in China have caused a significant shift of sentiment in financial markets.
China Curbs on Credit
Interest rates in China have risen to the highest level in two years amid the country’s tough talks on curbing credit. China is putting on the brakes on credit growth, and the effects of those policies are already starting to be felt. As the Financial Times reported, “China Vanke, one of China’s biggest property developers, was [recently] forced to drop a bond sale… blaming changes in market conditions.”
The noticeable tightening in Chinese monetary policy is bad news for its property markets. The country has also pledged to halt risky local funding for the construction of infrastructure projects. Investors know that this will hurt demand for commodities and industrial metals. Read more