Caution is the mother of wisdom
The nickel price on the London Metal Exchange (LME) lost some ground recently. After the high in the middle of September of just short of USD 20,500.00/mt, the 3 months price took a rapid fall. By the end of September, it had reached a relative low of almost USD 17,700.00/mt. How-
ever, this is where the futures market came to a standstill. A recovery movement began, with not only fundamental but also technical aspects. So far, this has led to a level of USD 19,450.00. Meanwhile the nickel future in London is once again trading above USD 20,000.00/mt.
A trigger for the correction had probably less to do with fundamental factors, but more with a generally increasing uncertainty in the markets with regard to the future outlook. This is mainly due to the rather mediocre economic data from China. This economic and military superpower has such dominance for demand in many markets, as was seen just thirty years ago in the USA (and Europe). In this regard many market participants, especially the speculators, look to the Far East in order to be able to judge what will happen to prices in the various investment segments.
For a while, the Chinese property developer, Evergrande, was making the headlines, and caused a great deal of nervousness, especially during the Chinese national holidays. There were fears that this shaky giant could lead to market distortions because there was a possibility of interest payments not being made after the holidays. The Chinese central government and the company were, and still are, doing everything possible to minimise the damage, also for reasons of reputation and power. And it is well known that the pockets of the Chinese state can be very deep, but yet not for every reason.
This is why it can be all the more suspicious that extensive circles are making every endeavour to talk down the possible influence that a collapse of this heavy weight could have. Any comparison to the Lehman bankruptcy during the financial crisis must not be made at all. It could be read that the global interdependence of this property developer is supposed to be relatively small, and therefore any damage would be more confined just to China itself. But who really knows this with any certainty. And even a significant negative impact on the Chinese economy would presumably be enough for a destabilisation on a global scale.
