What’s up: Five major Chinese regulators announced Monday that they had jointly convened key companies in the iron, steel, copper and aluminum sectors over the weekend. During the meeting, the agencies pledged to intensify regulation and closely monitor commodity markets, warning that there would be “zero tolerance” for speculation or market manipulation.
Commodity prices fell in China on Monday after the news broke. Futures on iron ore fell 5.2%, while futures on weapons (a type of steel used to reinforce concrete) fell 3.6%.
Atilla Widnell, CEO of Navigate Commodities in Singapore, told me that he considers this a good setback, as many day-to-day investors had outdone themselves.
“I think we’re now approaching acceptable price ranges,” Widnell said. He noted that steel and iron prices had “increased parabolically”, but seemed detached from the “underlying fundamentals of supply and demand”.
April data showed that Chinese demand “was starting to decline a bit” and that, really, given the country’s relatively early exit from the tough pandemic restrictions and the deployment of stimuli ”this year won’t be magnificently stronger. than last year “.
Still, enthusiasm for commodities among investors could backfire soon. U.S. President Joe Biden wants to spend $ 1.7 trillion to renovate the country’s infrastructure. And Goldman Sachs believes the case for higher oil prices “remains intact given the large increase in demand driven by the vaccine in the face of inelastic supply.”
The investment bank now expects the prices of Brent crude, the world benchmark, to reach $ 80 a barrel this summer, above the current $ 67.
Remember: Brent crude oil prices started the year below $ 52 a barrel. Thus, even if traders take a breather, the impact of significant price hikes will remain a major topic of conversation.
A Deutsche Bank survey released on Monday to 620 professionals in the global market found that 63% of respondents believe that higher-than-expected inflation is one of the three main risks to market stability. This exceeds 43% of their April survey.
Bitcoin continues under pressure after a huge shock
Regulatory action in China also fuels massive volatility in cryptocurrency markets.
Chinese Vice Premier Liu He told a group of finance officials on Friday that the government would “curb bitcoin trading and mining activity” as part of its goal of achieving financial stability. The government did not delve into specific policies aimed at mining or trade.
Although China has taken steps to restrict the use of cryptocurrencies for years, the focus on mining is new. HashCow, owner of the world’s largest mining operations, said Saturday it would stop selling machines to customers in China. Another Chinese mining company, BIT.TOP, said it would no longer offer mining services to mainland China customers.
The moves fueled the recent sale of bitcoins and shares in cryptocurrency-related companies. Bitcoin prices fell as much as 13% on Sunday. The currency was last traded at around $ 37,000 per coin, well below the $ 64,000 peak it reached a month ago, according to CoinDesk.
Step backwards: The correction of the seismic course in the crypto market does not extend to other parts of the financial system, at least for now. John Normand of JPMorgan believes this is partly related to who owns the digital coins.
“It is true that flows towards cryptography have been balanced between retail and institutional trade in recent quarters, which increases the risk of contagion,” he wrote in a recent research note. “But institutional holdings are likely to be limited to a wide range of hedge funds rather than a wider spectrum of asset managers, insurance companies, pension funds, central banks, sovereign wealth funds and commercial banks / investment. “
That said, should what is happening in the bitcoin world be seen as an early warning that investors are experiencing a change of mood?
“Crypt mania may provide a broader reading when it comes to more established markets because of the signaling effect it provides in terms of investor sentiment,” Richard McGuire and Lyn Graham-Taylor of Rabobank told clients. .
Virgin Galactic is about to send tourists into space
Want to make travel plans again? Have you considered … space?
According to the company, the VSS Unity spacecraft reached an altitude of 55.45 miles. The U.S. government recognizes the 50-mile mark as the edge of space.
“Everything worked like a dream,” Branson, who founded Virgin Galactic in 2004, said in an interview with CNN.
What it means: The mission is great news for Virgin Galactic, which plans to start launching paid customers next year. The company’s last spaceflight attempt ended abruptly when the plane’s rocket engine could not start, which set the company’s testing program months ago.
Investor Information: Virgin Galactic shares, which have struggled this year, have shot up 18% in premarket trading.
Virgin Galactic has already sold tickets for $ 200,000 to $ 250,000 to more than 600 people. Branson said “it won’t be long before they can get on board.”
Until next time
Lordstown Motors reports results before US markets open.
Tomorrow: New data on home sales in the US and consumer confidence.
– Laura He and Michelle Toh contributed to the communication.
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