Copper ETF Slump Doesn’t Bode Well for Global Markets

April 19th at 3:56pm by Tom Lydon

Exchange traded funds that track copper prices, a leading indicator for the global economy, slipped Friday as China’s growth prospects come into question.

The iPath AIG Copper Total Return Sub-Index ETN (NYSEArca: JJC) fell 1.8% Friday. JJC is has declined 13.3% year-to-date.

Copper futures were down 1.7% Friday, trading around $316.2 and moving into bear market territory.

“The copper market has been an accurate leading indicator, and it’s not pointing to a good bottom for China’s economy,” Jeffrey Sica, president of SICA Wealth Management, said in Bloomberg article. “That’s ominous, and it continues to be a major concern in markets.”

The Chinese economy experienced growth of under 8% in the past four quarters, the longest streak below 8% in at least 20 years.

Copper prices are seen as a gauge for the health of the Chinese economy as the country is a big consumer of the commodity. Investors are worried about a potential slowdown in China, the world’s second-largest economy. [Should You Listen to Copper ETF’s Warning?]

Moreover, on the supply side, copper production exceeded demand by 341,000 so far this year, compared to a total surplus of 238,000 tons for all of 2012.

“The increase in copper stocks gives reason to think supplies are plentiful, and China’s growth is not what people expected it to be,” Harry Denny, a broker at Hoboken, said in the article. “The market is well-supplied, and we’re going to continue to see pressure on prices.”

Other copper funds include iPath Pure Beta Copper ETN (NYSEArca: CUPM), which is down 12.0% year-to-date, and the United States Copper Index ETF (NYSEArca: CPER), which is down 11.0% year-to-date.

iPath AIG Copper Total Return Sub-Index ETN

For more information on copper, visit our copper category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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