So many catastrophic events have struck the world in the past few weeks that a new phrase – “black swan fatigue” – has been coined to characterise the market reaction. But amid so many black swans, investors should not take their eye off the white ones.
For most, China has fallen below the radar in the past couple of weeks. Given the enormity of events in Japan and Libya, that is understandable. But it is nonetheless a mistake to overlook the country that even through the current turmoil remains the most important driver of industrial commodity markets.
Those markets are offering an insight into what is happening there. Physical commodity markets that are heavily dependent on China such as iron ore and rubber are down 10-15 per cent since mid-February.