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OIL AND COPPER DIVERGENCE: ECONOMIC WEAKNESS AHEAD?

One distinct aspect of tonight’s market action is the divergence between copper and oil prices. As oil surges almost 8% higher copper is dropping 1%.  This is a clear sign that the rise in oil prices is causing fears of a global economic slow-down.  The risk of turmoil in the Middle East has the potential to have a very real impact on the global economy.  Weak developed markets likely can’t handle a sustained shock from higher oil prices.  Tonight’s decline in copper prices appears to be reflecting this belief.

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