By Bryan Rich
October 16, 2017, 4:00 pm EST
On Friday we talked about the biggest market movers: oil, copper and iron ore.
Oil was up 5.3% on the week. Copper was up 4%. And iron ore reversed sharply on Friday to jump 6%.
All were stronger again today.
Remember, China is the world’s largest consumer of commodities. And the import data late last week out of China showed hotter imports in copper and copper products (26.5% growth, year over year), iron ore (record high imports, up 10% from a year earlier), and crude oil imports hit the second highest level on record (up 12% year over year).
This leaves us wondering: Is China’s economy doing better than most think? And/or is this China hoarding commodities again?
At the depths of the financial crisis, China opportunistically stepped in and started gobbling up global commodities on the cheap (at the time).
Remember, China has $3 trillion in currency reserves, about $2 trillion of which are in U.S. dollars. Commodities are a good way to put those dollars to work.
And there always seems to be currency play at work in China, to gain some sort of advantage. You can see in the chart below, as the PBOC has weakened the yuan, commodities prices have fallen. And as they’ve been strengthening the currency this year, we may be seeing commodities coming back as a result.
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