Economists at CIBC World Markets warn that copper prices predict rough times ahead for markets and stocks. A CIBC World Markets Economics analysis found, on average, that copper prices tend to foreshadow movements in G-7 industrial production by three months.

“So whatÕs copper saying these days? ItÕs not good news if youÕre banking on a global re-bound any time soon. Copper prices peaked late last year and have been heading steadily south. Another couple of bad months, and a decade low will be in sight,” say CIBC economists. The underlying fundamentals look weak, too, they add in their analysis.

It notes that commodity prices are particularly sensitive to the global outlook, and that their price trends can be good predictors for the global economy. “They serve as a forward-looking indicator, since speculative buying tends to run ahead of actual underlying demand. Copper has a track record that many economic forecasters would look at with envy, having anticipated the Asian-led global slowdown in 1998, and turned higher just ahead of the improvement in global growth in 1999.”

“So as economists spin their various interpretations of the next weekÕs second quarter GDP figures for the US economy, donÕt miss the larger story happening around the world. Japan is in recession, East Asia is decelerating, Latin America is under siege, and EuropeÕs industrial sector has stalled. No economy is an island, and the global slump, well signaled by copper and other industrial commodities, bodes much better for bonds than for equities.”