[ad_1]
Wall Street may not panic about the trade war between China and the United States, but serious cracks are forming on the market raw materials. Industrial metal that is so sensitive to fluctuations in the global economy that it is affectionately known as Dr. Copper. The price plunged 16% over last month and hit its lowest level in a year on Wednesday.
Iron ore, another critical metal, fell 11% this year. Zinc has not been as cheap since mid-2017. And a Bloomberg index of industrial metals including aluminum and nickel closed Wednesday at its lowest since August 2017.
"Copper and other metals reflect fears of a global slowdown – created by the rates, "said Invesco strategist Kristina Hooper. "We are in a trade war that is unfolding on several fronts."
And then there is soy. China, the world's largest consumer of US soybeans, has imposed a 25% retaliatory right on the crop last week.
The commercial brawl has already dealt a huge blow to American farmers. Soybean prices fell 13% this year to the lowest since December 2008, during the Great Recession.
"If you lose your biggest customer, what do you think it will happen to the prices?" asked Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Related: The fallout of the trade war: soybean prices plummet to their lowest level in 10 years
Contrast the collapse of commodities with what is happening on the stock market.
The S & P 500 jumped more than 2% this month, and the high-flying Nasdaq jumped 4% to a record high on Thursday. Progress reflects optimism that the trade fight between the two largest economies in the world will be resolved before the November mid-term elections in the United States.
The percentage of individual stock investors who are bullish climbed this week to 43.1%, according to the Investor Sentiment AAII survey. Bespoke Investment Group said it was the biggest leap of the week since the election of President Donald Trump in November 2016.
Trump expressed confidence that he will eventually reach an agreement with China – even though the high-level talks have stopped.
"I'm going to open things up, better than ever, but it can not go too fast," tweeted Trump on Wednesday.
However, the recent fall in commodity prices suggests a growing nervousness about the economic benefits of the titling rates put forward by Washington and Beijing.
It is unusual to see the price of commodities fall so sharply during a period of great economic health around the world. US economic growth for the second quarter could reach a very fast pace of 4%.
Related: The trade brawl threatens America's burgeoning oil exports
Yet copper, seen as a bet on the direction of the global and Chinese economies, is declining 15% this year. Virtually all of this decline has occurred since the beginning of June when trade tensions intensified.
China is an avid consumer of copper, which is used for plumbing, wiring, heating and various other purposes. China engulfs about 40 percent of the global supply, according to Ed Yardeni, chairman of Yardeni Research.
Dr. Copper is flashing "red code" about China, Yardeni told customers in a report earlier this week. He said the recent fall has "increased the chances of a recession".
The commercial stalemate comes at a difficult time for China. The world's No. 2 economy had already slowed down, hurt by the government's efforts to reduce pollution and chronic dependence on debt. Now, China has to face a trade war.
"There is a legitimate concern about the impact of these tariffs on the Chinese economy," Boockvar said.
CNNMoney (New York) First published July 12, 2018: 1:29 PM ET
[ad_2]
Source link
