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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CHINA
- In the past 8 months, we have seen that the significant deceleration in Chinese economic activity (i.e. Li Keqiang Index) combined with the fall in liquidity (annual change in TSF 12M sum) have been weighing on domestic and some international asset prices.
- This chart shows that prices of iron ore, which have historically been sensitive to the dynamics of China, have been plunging since their peak reached in early May (down nearly 60%) and fell below the $100 level (per metric tone) on Tuesday.
- It was recorded that the daily crude steel output in October dropped to its lowest level since March 2020 (source: Mysteel), which highlights the severity of the economic slowdown in China.
- Part of the plunge in iron ore prices was also linked to the government crackdown on the real estate market, which has been a strong buyer of steel; for instance, the collapse in Evergrande ST bonds have coincided with the fall in Iron Ore prices.
- The rally we observed in October driven by the risk-on environment (sharp drop in volatility combined with some JPY depreciation) seems to have been short-lived as Chinese risky assets have started to consolidate again in the past two weeks.
- Hence, it will be difficult to turn bullish on domestic risky assets and some of the China-sensitive commodities without a significant improvement in economic indicators.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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