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The materials and energy sectors held the S&P 500 back from closing in positive territory, despite the Dow Jones seeing 8 straight days of gains – its best run since March 2013.
Dalian iron ore futures were within a hair’s breadth of hitting the daily limit down loss of 10% yesterday, and the active Dalian futures contract in Chinese steel rebar has lost 9.7% in the past two days. A nasty fight has blown up among bond holders of defaulted Dongbei Special Steel, and after the Liaoning government tried to push through a debt-to-equity swap deal with no consultation, bondholders are now calling for the government to ban the issuance of all debt financing by Liaoning-based enterprises. Liaoning being a key industrial province and a major driver of commodity demand. This comes as iron ore inventories continue to surge at Chinese ports and more detailed Chinese GDP data underlined how much stimulus and credit to the industrial and construction sectors bailed out a weakening economy. This is not good news for the Aussie dollar, which dropped over 1% through the US$0.75 handle overnight, closing the session US$0.7505.