Iron ore futures have tumbled 8.3% in less than a day

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Iron ore prices eased on Tuesday after hitting a 26-month high on Monday.

And it looks like the weakness may become even more acute today with Chinese futures tumbling overnight.

The May 2017 future on the Dalian Commodities Exchange slumped 4.56%, closing the session at 606.5 yuan.

It has now fallen 8.3% from Tuesday’s high, doing little to dispel the view that Chinese commodity futures are now more akin to a casino rather than a market.

It looks like the croupier spun up red on this occasion.

There were also smaller declines recorded in both rebar and coking coal futures overnight.

The losses corresponded with the release of Chinese industrial output and urban fixed asset investment earlier in the session. While the headline figures topped market expectations, there were signs that property market activity continued to cool in November.

Residential sales, construction activity and investment all weakened in November, particularly for sales which tends to act as a lead indicator for future demand.

Whether that or other less fundamental factors caused the decline overnight, the slump in futures sets up the possibility of renewed weakness in spot markets on Wednesday.

According to Metal Bulletin, the spot price for benchmark 62% fines fell 0.2% to $83.42 a tonne, trimming its year to date gain to only 91.5%.

The losses for higher grade ores were similar to that seen for the benchmark price, with those for lower grade ores slightly larger.

However, if the losses in futures are a true lead indicator — and they do tend to lead spot markets now — it suggests the losses on Wednesday may be significantly larger.

Trade in Chinese commodity futures will resume at Midday AEDT.

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