Copper miners drag on Footsie

7th Mar 2014 15:24

The Footsie is moving lower despite the better-than-expected US jobs data released just an hour ago. Shares of copper miners such as Anglo American (-4.7%) and Antofagasta (-3.8%) are leading the way lower.Overnight Shanghai Chaori Solar defaulted on debt of $653,990 (390,000 pounds).That is an insignificant amount. However, in so far as the company does not receive a bail-out from the state, as has usually been the case, then that may confirm the higher tolerance from Beijing to allow other firms to have to submit to the discipline which capital markets impose.In that regard, Liu Mingkang, the former Chairman of the China Banking Regulator Commission, said today that China should set up a system for bonds to default, Bloomberg reported.Acting as a backdrop, the number of Chinese companies with what in the west are considered to be too-high levels of debt on their balance sheets exploded after the financial crisis. Furthermore, many use copper as collateral for obtaining loans.Hence, a marginal event such as the above which affects their cost of capital could conceivably have ripple effects which are hard to predict. For a few observers, at least, that is the worry. Ratings agency´s such as Moody´s, on the other hand, are of the belief that greater market discipline is in fact a good thing and that the risks for China are more than manageable.Three month copper futures were recently lower by 1.75% to the $6,915.258/metric tonne mark. AB