The Mining GFC is threatening again but was held at bay by oil last night. The US dollar was strong:
Euro and yen weakish:
Commodity currencies outright weak:
Oil was sold but then bid:
Base metals are threatening breakdown:
Miners were hit hard:
And high yield fell despite the oil bounce:
As I said late yesterday, Chinese growth will be OK for another quarter of two so I can’t see a full rerun of the January Mining GFC rout just yet but the dynamics are set for a kind of chronic version of it through H2. As the US dollar rises and China responds with a falling yuan, commodity producers and emerging markets literally lose their business models as capital flight raises interest rates crimping domestic demand and external demand is hit by falling commodity prices and rising Chinese competitiveness.
In the gun are:
- commodity prices;
- big miners;
- commodity currencies;
- high yield debt, and
- the Chinese property bid in Australia.
I full expect the big miner bear market to be at material new lows before year end.