Today’s Markets
- In Asia, Japan +0.5% to 9868. Hong Kong closed. China -0.1% to 2759. India -0.4% to 18763.
- In Europe, at midday, London +0.4%. Paris flat. Frankfurt +0.1%.
Friday’s Economic Calendar
Auto sales
9:55 Reuters/UofM Consumer Sentiment
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 ECRI Leading Index
China’s factory sector grew at its slowest pace in 28 months in June as new orders expanded less quickly, with weaker global demand and tight monetary policy at home pinching production.
Although the moderation in activity did not point to a sharp drop-off in Chinese economic growth for now, the data was slightly worse than forecast and led some analysts to predict China may be less aggressive in tightening monetary policy conditions later this year.
India’s manufacturing sector lost steam last month with marked declines in output indicating taut monetary conditions may be taking hold even as prices remained at elevated levels, a survey showed.
The HSBC Markit Purchasing Managers’ Index, based on a survey of around 500 companies, showed a sharp fall to 55.3 in June from 57.5 in May, its lowest level since September last year and the steepest monthly fall since November 2008.
The June reading marked the 27th consecutive month that the key index of manufacturing in Asia’s third-largest economy has been above the 50 mark that divides growth from contraction.
The hard landing that I foresee for China will probably prick the global commodity bubble, which is already showing signs of topping out.
Agricultural product prices have jumped, the result of robust demand, bad weather last year in Russia, recent floods in Australia, and dry and hot La Nina conditions in Argentina.
Industrial metals such as copper were on a tear. So were precious metals, such as silver.
But much of the leap in commodity prices was due to investors and other speculators. Exchange-traded funds had already tied up much of the physical supplies of gold and other precious metals. Futures contracts held by speculators were up 12 percent in 2010 through October, with sharp increases in bullish bets on crude oil, copper and silver. Volatility forced futures exchanges to raise margin requirements on a number of commodities.
The confidence that China would continue to buy huge quantities of almost all commodities has been the bedrock belief of speculators. For example, there were rumors that China was again building its emergency petroleum reserve in the first half of this year.
I’ve studied many bubbles over the years, and concentrated on predicting their demises. Commodities show every sign of being in one.
The recently completed Jiaozhou Bay bridge is, at 26.4 miles, the world’s longest sea bridge. The bridge serves as a shortcut between the port city of Qingdao and a nearby airport and industrial suburb. China is also home to the longest land bridge, a 102 mile rail bridge on the Beijing-Shanghai railroad. In fact, of the 20 longest bridges in the world most are in China.
