China worries chill markets, copper dives

Posted by Reuters Canada

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A fall in copper to near four-year lows combined with increasing concern about China’s economic slowdown sent a wave of unease on Wednesday through world financial markets.

Global stocks fell for a fourth day and copper, often regarded as a proxy for China’s economic fortunes, hit its lowest level since 2010 after Shanghai futures had again fallen by their 5 percent daily limit.

U.S. stock futures prices pointed to another negative start for Wall Street later, with little in the way of U.S. data to drag attention away from the China anxiety.

In Europe, bourses from London to Lisbon tumbled .FTEU3 and safe-haven German government bonds were in demand as the jitters added to the effects of the tug-of-war over Crimea, which has pitted Russia against Ukraine and the West.

“Markets are watching what is happening in copper with awe and trepidation,” said Societe Generale head of currency strategy Kit Juckes. “It’s partly ongoing concern about Chinese growth (or lack thereof) and nagging worries about the Ukraine. And partly it is just that the commodity bubble burst last year and not everyone noticed.”

Copper’s fall follows China’s first domestic bond default which has raised concerns about a possible unraveling of the many loan deals which have used the metal as collateral.

CHINA CHILL

Economists are concerned that recent moves by Beijing to stamp out speculation on its rising currency and overly easy lending may have overshot and will damage the world’s second largest economy.

This is adding to broader strains on emerging markets as they try to cope with shifts in global attitudes while recovering economies such as the United States begin to phase out the cheap money churned out in recent years.