Just how bad is Europe? If the action in the base metals is any indication, not good.
Sentiment in the market took a sharp turn for the worse after the latest PMI data showed Europe’s business slump deepened at a much faster pace in April than expected.
Specifically, the Markit PMI fell to 47.9 from 49.2 in March, a five-month low. The forecast was for a rise to 49.3.
Meanwhile, European factories had their worst month since June 2009. Companies said their order books were shrinking and they were cutting jobs in reaction to falling demand.
Is Europe really this bad? If the action in copper is any indication, it is.
The Fast pros often recommend looking at the action in copper and other base metals to either confirm of deny an economic thesis such as this.
(In fact, copper is sometimes called Dr. Copper because strong price action often precedes a rally and weakness often precedes a slide. )
And “Copper is having problems,” says commodities investor Dennis Gartman. “It tried to rally – but couldn’t. The action looks very, very poor.”
And moves in other base metals seem to tell the same story.
“Aluminum, zinc – I pay attention to all the base metals. It’s not just Dr. Copper. They all have a PhD in economics and they’ve been turning down.”
If you’re a bull, that’s not good.
All told, “It does not speak well to the global economy,” Gartman says.