Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

MarketScreener Homepage  >  Commodities  >  Silver       XAGUSD

My previous session
Most popular
News SummaryAll newsTweets

Metals Slide Deepens as Trade Fears Escalate

share with twitter share with LinkedIn share with facebook
share via e-mail
07/11/2018 | 08:45pm CEST

By Amrith Ramkumar and David Hodari

A selloff in industrial metals and other commodities intensified Wednesday, as the latest tariff threats from China and the U.S. escalated worries about the impact of a trade battle on the global economy.

Copper tumbled as much as 4% to its lowest level in nearly a year, before closing down 3.4%. Futures prices for the red metal have tumbled 18% from a four-year high in June, bringing it close to a bear market.

The trade tensions pounded other materials: zinc, tin and lead plunged at least 2%. The slump extended to almost all corners of the commodity market, with materials from oil to cotton also getting hit. China is the world's biggest commodity consumer and accounts for roughly half the demand of many metals like copper, so concerns over its economy can swing materials' prices.

Investors fear that a far-reaching trade fight could slow commerce, which would weaken more economies that consume large amounts of materials. Other assets closely tied to growth like emerging markets have also struggled. It is a sharp reversal from 2017, when synchronized global growth propelled prices of raw materials and emerging markets higher.

Because they get used in everything from construction to smartphones, prices of commodities are often used by money managers as a bellwether for global growth. While robust U.S. economic and earnings expansion have kept stocks from tumbling, some analysts have become uneasy that the volatility in commodities is signaling future turbulence in other markets.

"It's one of those red flashing signals we need to pay attention to," said Kristina Hooper, chief global market strategist at Invesco. "Investors should probably be more concerned than they are because typically Dr. Copper is a very good predictor of where the global economy is going."

On Tuesday, the White House said it would assess slapping fresh 10% tariffs on $200 billion in Chinese goods. China has threatened to match U.S. tariffs with its own countermeasures.

The recent downturn in metals prices is reigniting fears that a Chinese economic slowdown could spread. Similar anxieties sent stocks around the world tumbling in late 2015 and early 2016, with copper slumping below $2 a pound. On Wednesday, copper traded below $2.75 for the first time in nearly a year.

Some analysts expect China to suffer more than the U.S. if the trade fight escalates. Recent data showing weakness in the nation's economy has added to these worries: China's manufacturing sector slowed in June from the previous month.

Analysts are concerned that tariffs will now knock consumer buying particularly of products where heavy metals are a major ingredient, like cars and air conditioners.

Air conditioners are "a real growth area for the Chinese copper market," said Oliver Nugent, a commodities strategist at ING. They "account for about 25% of demand in the country."

China has also become a major trading hub for metals, with traders saying that activity there can dictate investor sentiment later in the day in London and the U.S. Lately, selling by Chinese traders has pushed others to also head for the exits.

"We've seen [the Shanghai Futures Exchange] selling in free fall and that's spilled over into [London Metal Exchange] futures," said Kash Kamal, an associate at BMO Capital Markets. "It's hard to see how this scenario can be de-escalated."

Some analysts think the metals market could rebound if Chinese economic data improves and compromises on trade calm investors. Copper and other metals also struggled for momentum last summer before surging in the fall alongside other risky assets.

In one potentially optimistic sign, speculators have eased off copper. Hedge funds and other speculative investors have cut net bets on higher copper prices for three straight weeks, leaving the market is a less vulnerable state, Commodity Futures Trading Commission data show.

One worry is that the rout could spread to bigger commodity markets like oil. Some investors trade resources like oil and copper in a single basket.

U.S. crude fell 4% on Wednesday, on track for its largest one-day drop since May. The move was largely driven by Libya indicating it would resume export activities at its eastern ports, potentially easing fears of a global supply shortage. But oil futures still sank despite a larger-than-expected weekly drop in U.S. inventories, indicating investors may be skittish.

Agricultural commodities have already come under pressure, with some -- like soybeans -- already directly affected by the tit-for-tat tariffs between Washington and Beijing. Other soft commodities like coffee and sugar have also slid.

Another alarming sign for commodity investors has been the rising dollar. Economic momentum has shifted squarely to the U.S., sending the dollar to its highest level in a year. A stronger dollar makes commodities more expensive for overseas buyers. On Wednesday, the WSJ Dollar Index added 0.7%.

"You've got a lot of selling pressure building on itself," said Darius Tabatabai, a portfolio manager at Arion Investment Management, a commodity-focused money manager based in London. "When we get a move like this, it can accelerate in the short term."

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David Hodari at David.Hodari@dowjones.com

Stocks mentioned in the article
ChangeLast1st jan.
GOLD -0.04% 1200.59 Delayed Quote.-7.94%
LME COPPER CASH -0.70% 6276 End-of-day quote.-12.60%
PLATINUM 0.21% 825.3 Delayed Quote.-10.95%
SILVER 0.06% 14.465 Delayed Quote.-15.74%
US DOLLAR INDEX -0.06% 94.13 End-of-day quote.2.48%
share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on SILVER
09/25Copper Slightly Lower as Investors Await Fresh Trade Signals
09/25Copper Stalls as Markets Awaits Fresh Trade Signals -- Update
09/25Copper Stalls as Markets Awaits Fresh Trade Signals--Update
09/25Copper Slips as China Absorbs Canceled Trade Talks
09/25Glencore Doubles Buyback Program to $2 Billion
09/24Gold Prices Increase on Falling Dollar
09/24Copper Extends Gains Despite New Tariffs
09/21METALS : Copper Surges as Tariff Fears Ebb
09/20Rio Tinto Shares Rise After Buyback; Likely to Boost PICK ETF
09/20Glencore Places $125 Million in New Bonds in Tap-Issue
More news
Duration : Period :
Silver Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends SILVER
Short TermMid-TermLong Term