Copper/gold ratio and yields diverge further
Driven by rise in copper
Just a note to say that MacroMarketsDaily will soon be taking a much-needed vacation, so there will be no newsletter in the first half of August.
Chart of the Day
One relationship quite a few people follow is the link between the copper/gold ratio and the US 10-year bond yield, the logic being that rising copper and rising bond yields both tend to signify rising GDP growth and inflation. In that respect, it’s unusual that the two have diverged even further in recent months, with yields falling while the copper/gold ratio has started rising. That looks especially unusual given the recent weakness of Chinese equities and the credit impulse, which we might have expected to cause some weakness in copper prices. News reports say that the rise in copper this time is due to supply concerns, following flooding in China which could raise demand as communities rebuild.
US new home sales fell to 676,000 annualized in June, back below the pre-Covid level.
The German Ifo survey expectations component rose to 104.0 in June, the highest in years.
In Mexico, the unemployment rate fell in June to 4.0%.
China’s equities have been weakening more than those elsewhere, as the state cracks down in private-sector companies, especially education-related tech firms.
The main emerging market indices have all lost ground against the S&P 500 in the past month, but China's Shanghai index has fallen the most.
As a result, MSCI’s EM index has lost ground vs the DM index.
Copper’s strong rise means it is heading toward the recent high.
It’s been a mixed picture for the cyclical sectors of the S&P 500 lately - financials and industrials have done a little worse than the index, but energy is up by the most.
Cryptocurrencies rebounded yesterday, some say due to news that Amazon will soon accept them as payment, some say because those selling Chinese equities have been putting the cash into crypto instead.
Like what you see? Please forward this email to your friends and colleagues, or use the button below to share it on social media. They can also follow us https://twitter.com/macro_daily