This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bernanke, Chinese Data to Weigh on Commodities

NEW YORK ( TheStreet) -- Commodities are giving back some of the gains made early in the month.

The catalysts are the congressional testimony from Federal Reserve Chairman Ben Bernanke suggesting potential reductions in quantitative easing stimulus, and weak manufacturing data out of China indicating declining demand for fuel and metals.

Most of the commodities losses have been seen in oil and copper, but the weakness has been widespread. The Standard and Poor's GSCI Index (which catalogs 24 commodities) has shown weekly declines of more than 1% after the data and commentaries were made public.

These moves are not entirely surprising. Copper is generally viewed as a key indicator of economic activity because of its substantial uses in construction projects.

China is the world's largest consumer of copper, and the country's most recent manufacturing data showed contraction for the first time in seven months. This, in conjunction with the possibility of tighter monetary policy in the U.S., creates a greater likelihood we will see declining demand for raw materials into the beginning of next year.

Chinese Data

Preliminary readings in the HSBC Purchasing Managers' Index showed that manufacturing activity in China contracted for the month, falling below the survey's 50 line, which signals expansion.

The report for May showed a result of 49.6, down slightly from the already weak April reading of 50.4. This follows the U.S. manufacturing purchasing managers' index, which dropped to a seven-month low of 51.9 for May, following a 52.1 reading for April.

Globally, the broad trajectory toward weakness here is clear, and commodities markets are set to head lower in response. In addition to its substantial metals imports, China is also the world's second biggest consumer of oil.

This month's contraction in manufacturing activity signals that a major trend change might be in place, and this limits the prospects for construction building in Asia's developing city centers.

The sector acts as the main driver of economic activity, so it is not surprising to see that declining manufacturing figures have contributed negatively to GDP growth in China. Chinese GDP dropped to 7.7% for the first quarter, slowing slightly from the 7.8% rate that was seen for all of 2012 (the weakest yearly pace in 13 years).

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs