Copper Crosses the Rubicon -Christopher Vecchio, Currency Analyst at DailyFX

"Is this China's Lehman Brother's moment? When the government refuses to step in, instead allowing defaults to occur, when intervention could have prevented a bigger crisis? That may very well be developing. One needs to look no further than Copper to see this crisis starting to unfold. First, some background on Copper: it is a highly malleable metal with many industrial roles, including serving as a conductor for heat and electricity as well as a building material. But Copper has another role, specifically in China, which is why it appears that a financial crisis is brewing. It's been estimated that roughly 60-80% of Copper imports over the past few years have been used as collateral for borrowing (Reuters). How would this impact Copper? As Chinese companies using Copper as collateral default on their obligations, they're forced to liquidate their assets. The first domestic Chinese bond defaults have provoked a massive down-drift in Copper prices since Friday, with the price falling over 10% in the past four days alone. Concern may be spreading that defaults beget defaults; as price falls, more firms will be margined out. Copper's decline bodes poorly for the global economy. Nicknamed “Dr. Copper,” the reddish-orange metal has long been considered the bellweather for the global economy. In context of the significantly weaker than expected February Chinese trade data, the dive in Copper makes it seem like an economic slowdown is hitting China – and that's not good for anyone."