Copper’s freefall is freaking out world markets – by Marc Jones (National Post/Reuters – March 12, 2014)

The National Post is Canada’s second largest national paper.

LONDON — A dizzying fall in copper to a near four-year low compounded increasing concern in China over its economic slowdown on Wednesday to send a wave of unease sweeping through world markets. World shares fell for fourth day, but it was copper, often seen as a proxy for China’s fortunes, that grabbed the headlines as Shanghai futures fell by their 5% daily limit again and benchmark prices of the metal slumped to their lowest since 2010.

In Europe, bourses from London to Lisbon tumbled in early deals and safe-haven German government bonds were in demand as the jitters compounded the geopolitical tug-of-war between Russia and Kiev and the West over Crimea.

“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 plunge comes in the wake of China’s first domestic bond default which has sparked concerns about the potential unravelling of loan deals where the industrial metal has been used as collateral.

The metal has been in freefall for the last three days but the worries finally appeared to be catching up with other parts of the market.

Stocks across Asia, although ironically not China, had seen sizable falls, while the Australian dollar and the Chilean peso and South Africa’s rand, currencies highly sensitive to commodities, all buckled.

The aussie was last down 0.25% at $0.8960 though traders said it could have been a lot more had it not been for demand created by a big AUD$7 billion bond sale.

Japan’s Nikkei retreated 2.6%, continuing the see-saw pattern of the last couple of months, while Australian stocks shed 0.6%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2%.

That mirrored a lacklustre performance on Wall Street, where soft data left investors no wiser on whether the U.S. economy’s troubles were merely weather-related or something more worrisome.

CHINA CHILL

Economists worry that recent moves by China to stamp out speculation on its rising currency and overly easy lending may have overshot, adding to the broader strains on emerging markets.

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