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Copper, aluminum, nickel and other commodities plunged to new lows on fears that China’s faltering economy will exacerbate a market awash in metal.
The latest event to spook investors was the steep decline in Chinese stocks earlier on Monday. Copper and aluminum hit six-year lows. Nickel plunged 10 per cent. Zinc and lead dropped to five-year lows. Gold, usually a safe haven in times of turmoil, barely rose.
“All bad news is bad news and good news is no news. That’s the environment we are in,” said Jessica Fung, commodity strategist with BMO Nesbitt Burns. Once the engine behind the bull market in commodities, China’s slowdown is wreaking havoc across the mining complex.
There is less and less confidence that the world’s second-largest economy will reach its 7.5-per-cent growth rate target. Recent data showed a decline in China’s manufacturing sector, a top consumer of metals such as aluminum and steel.
China’s recent yuan devaluation heightened concerns that its economy is worse than previously thought. Monday’s 8.5-per-cent selloff on the Shanghai composite index shattered investor confidence and sent global markets into a tailspin. This comes after five years of slowing economic growth in China, the world’s largest consumer of raw materials.
“There is a contingency out there who think that the Chinese government may no longer have the same type of powers to re-energize the economy,” said Bart Melek, head of commodity strategy with Toronto-Dominion Bank.
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