The ridiculous swings in Chinese stocks are now driving movements in the iron ore price

The ridiculous swings in Chinese stocks are now infiltrating other asset classes, including iron ore.

Having fallen by more than 10% on Wednesday, the largest one-day percentage fall on record, the spot price for 62% Fe iron ore fines rebounded by $4.40, or 9.87%, to $48.99 overnight according to Metal Bulletin’s iron ore index.

Not only did the bounce take the price off the record-low level of $44.59 from a day earlier, it was also the largest percentage increase on record.

So in the space of two days the price for Australia’s largest good export by value completed a 20% round trip.

Amazing, and to be frank, slightly disconcerting.

Should a 20% price swing occur because of massive market manipulation in Chinese stocks to orchestrate a bounce? It does raise more than a few questions as to the fundamentals that China’s economy is built upon.

Whatever your thoughts, the iron ore spot price is on track to make it two gains in row, at least based off Dalian iron ore futures. The most actively traded September contract finished the overnight session sitting up 1.38% at 368.5 yuan. Should that be sustained today it’s likely the spot price will follow suit this evening.

That is, of course, dependent upon the movements in Chinese stocks today.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at