China’s Stock Meltdown Spilling Over to Commodity Markets

Commodity futures markets are the latest to take the hits in China as they are simultaneously dealing with a stock market meltdown. The Chinese government is taking measures to ease the falling Shanghai Composite Index, but investors insist on taking as much cash out of the Chinese markets.

A Chinese trader at a private equity firm reportedly told a Bloomberg reporter “people are selling everything in sight to raise cash…some need to cover margin calls in the stock market, and others fear the Chinese economy will be damaged by the crisis.” Most commodities tumbled today, be it silver to sugar…metals (including nickel and silver) on the Shanghai Futures Exchange were down their daily limit…rubber entered a bear market…steel (rebar) and iron ore…eggs…soymeal – all dropped limit down.

Kevin Craney, Director of Managed Futures at RJO Futures in Chicago, shares his view regarding the fundamental assessment of the commodity futures markets by stating, It seems that commodity markets in China are besieged as collateral damage from their stock market.” Craney added,Just goes to show you how all markets can be affected when one sector gets hit hard – investors look for other sources for cash now.”

While circumstances in China appear bleak at this time, the US markets are not showing the signs of the sell-off our Asian counter-parts are experiencing. In fact, the US commodity markets, in general, only have slightly higher volatility than normal but appear to be trending normally.

ALL COMMENTARY IS CONSIDERED OPINION & VIEWS FROM THE AUTHOR AND NOT A SOLICITATION OF ANY SECURITIES. THE RISK OF LOSS IN TRADING COMMODITY INTERESTS CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.