The UK Index ’s miners are suffering this morning (down 3 to 5%) as raw materials prices (excluding oil) continue to track back towards month lows on a trio of drivers;

1. Weekend Chinese trade data showed a surprise drop in both exports and imports (-1.8% YoY and -10.9% YoY, respectively). While Bulls point data not being quite as soft in domestic currency as in dollars, the news nonetheless fans fears of more marked economic slowdown and reduced demand for raw materials. Bears highlight import growth deceleration cooling faith in China’s supposed transition from export and investment led to more consumption and services centred.

2. Chinese intervention to curb a recent outbreak of domestic commodity market speculation is also in full swing after recent strong gains. Investors had sought out commodities as an alternative to a more highly regulated equities sector following last years crash, however, margin calls for who bought raw materials contracts at the top may be exacerbating things via forced selling.

3. With commodities priced in dollars, the Greenback’s recent rebound from 15-month lows to fresh May highs of 94 is hurting, even if Friday’s US jobs report only went to muddy the waters of Fed rate hike expectations. The headline Non-Farms Payroll jobs number may have come in low and missed consensus, but it remains close enough to the running average. Unemployment ticked up, however, an acceleration in wages growth suggests potential inflationary pressures. The guessing game goes on.

Mike van Dulken, Head of Research, 9 May