Copper: Ever Slow China Recovery Demands More Patience From Bulls
It was the best data in a while in a country starved of good economic news: China reported on Friday that its industrial output grew 4.5% in August from a year earlier, versus a forecast 3.9%. Retail sales expanded by 4.6%, beating an expected increase of 3%,
Crude oil, rallying for a third week in a row, added almost 4% in the latest week as it responded to the numbers from the world’s top importer of the commodity. Copper, which owes half of its consumption in the refined form to China, did commendably, too, rising 2.3% on the week.
But that’s where the parallels between the two ended.
The oil rally continued with little disruption this week in what is admittedly an extraordinary set of circumstances for any commodity now, given the super squeeze on crude supply applied by the Saudis and Russians.
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Copper, however, gave back more than half of last week’s rally in just a day, with the catalyst for the downturn being the same China that bulls premised the earlier run-up on.
While previously, it was good news on industrial output and retail sales, this time, it was renewed concerns over the health of China’s too-big-for-its-own-good property sector.
China’s property market faces a new test this week with more bond payments due for embattled developer Country Garden Holdings. Chinese authorities also detained employees of China Evergrande (HK:3333) Group's wealth management unit, spurring concerns over renewed government scrutiny on the property sector.
The People’s Bank of China is widely expected to keep its loan prime rates at record lows this Wednesday as it moves to shore up economic growth. But despite stimulative measures, the outlook for China’s
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