In the past week we seen the following movements:-
• The Australian dollar fall from 1.061 to currently 1.043
• Gold fall below USD1500 to a 5 week low
• Copper, Aluminium & Nickel continue to fall in USD
Financial news is still focused on the uncertainly with Greece Government debt and slowing economic data out of China. These two events point to a limited upside in commodities at least in USD, however our falling AUD/USD exchange rate will soften the decline.
The following article & attached graph from Business Insider summaries the concern with a slowing Chinese Economy
Things Might Get Ugly For Copper
By Gregory White – Jun. 27 2011, 7:38 AM
Watch for a Chinese slowdown to crush copper, warns Societe Generale. Their analysts believe a slowdown in the country is already happening, with recent PMI data pointing to lower than expected growth. Now, that slowdown may be about to hit markets, particularly one that has remained somewhat safe up until now.
From Societe Generale:
As already mentioned in our May 16 paper, China’s share of global copper consumption is close to 38%. Copper-consuming sectors are very sensitive to economic cycles and therefore mean copper prices are tightly correlated to the global economic trends. The Chinese slowdown was confirmed over the last couple of weeks with the country’s growth prospects reduced to single digits in 2011 (+9.4% in 2011, SG economists) weighted by Beijing’s anti- inflation campaign (higher rates) and weaker global demand (PMI for June are at 50.1 just above contraction levels, lower than May’s 51.6). Chinese 5y CDS are now at a one-year high of 90 and Chinese Shanghai index is in negative territory at minus 2% year to date.
Note, copper, which has slide somewhat since the start of 2011, may be about to tumble.
Soc Gen’s team suggest June 30 Chinese PMI data as the next important day to watch, if this story is about to unfold.
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