Sell Off In Copper Suggests All Is Not Well In Global Economy

Wary financial markets are watching the decline in copper, to see if the red metal is acting as a fire alarm for the global economy.

With a quiet economic calendar Wednesday, the Treasury’s 10-year auction could also take on a higher profile than normal, especially ahead of next week’s Fed meeting.

Stocks wobbled Tuesday, as concerns swirled that the economy is not growing fast enough, and traders were most worried that China could be stumbling. The Shanghai stock market was higher overnight but U.S. stocks fell with copper, a bellwether on the Chinese economy.

“Copper and iron ore are heavily used in China as collateral on loans,” wrote Steve Scacalossi, director, head of sales global metals at TD Securities. “With the stress in the credit market and tightening controls unwinding of the carry trades would have an impact on the spot price–so it is difficult to gauge how much of the selloff is due to falling growth expectations and how much due to unwinding of carry trades.”


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu