In addition to another sizable daily inflow to LME copper warehouse stocks trouble continues to expand in the Chinese property sector with share prices throughout the sector falling sharply and government authorities expected to arrest the CEO of “Evergrande”. Therefore, the bad news flowing from the Chinese property sector is likely to get worse before it gets better. In our opinion, the Chinese government has been allowing and promoting the expansion of housing in their attempt to transform the country into a domestic consumption nation less vulnerable to global trade. However, the copper market also has building negative supply forces as the market’s contango has reached the widest level since 1994 indicating prompt supply is building rapidly. In fact, since June LME copper warehouse stocks have increased by nearly 200% off fears of softening Chinese demand. Fortunately for the bull camp economist are turned upbeat toward Chinese factory output suggesting activity may be “bottoming out” because of stimulus efforts. It should be noted that an extended Chinese holiday looms ahead which could mean Chinese companies might avoid fresh positions that will need to be managed while they are out of the office.
GOLD / SILVER
Commodities mixed with global equity markets tracking lower. Critical economic news overnight included a Japanese Corporate came in hotter than expected. Troubles in the Chinese property sector continue with shares dropping sharply after the company missed a bond payment and an executive detained by Chinese authorities. The North American session will start out with a weekly private survey of same-store sales followed by August Canadian manufacturing sales which are expected to have a moderate downtick from July’s 1.6% reading. The July Case-Shiller home price index is forecast to have a modest uptick from June’s -1.2% year-over-year rate. August new home sales are forecast to have a minimal downtick from July’s 714,000 reading. The Conference Board’s September reading on consumer confidence is expected to have a modest downtick from August’s 106.1 reading. Fed Governor Bowman will speak during afternoon US trading hours. Earnings announcements will include Cintas before the Wall Street opening while Costco Wholesale reports after the close.
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