Why are there abrupt price fluctuations in rubber and latex?

An initial euphoria that lasted less than a week. The poor performance of assets from the Asian giant dragged commodity prices, including rubber and latex, into a cycle of abrupt rises and falls over the past week. The reasons? What hasn’t happened yet: doubts and expectations about the effectiveness of the stimulus package pushed by the Chinese government.

The excitement didn’t last: bad data from China pulls down natural rubber prices.

Latex and natural rubber prices corrected downward, dragged by China’s weak performance last week. Volatility became the norm, with abrupt ups and downs observed in recent days. This same behavior was seen in other commodities, like oil, and in the Chinese stock market, which was the epicenter of these fluctuations. Investors seem to have realized that the stimulus measures implemented by the government are not solving the structural problems of the Asian giant and, for now, do not seem effective in stimulating consumption.

Thus, prices, which had already reached unusually high levels, moved downward this week. The correction could continue in the short term, although supply issues will likely put a (high) floor on the decline.

Optimism around China’s economic measures cools, but some remains.

China’s economic stimulus measures initially triggered a rally in the stock market, with a 30% rise over three weeks. Then, they dropped nearly 7% in a single day. The economic data hasn’t been encouraging either.

During the holiday week known as Golden Week, there was an increase in travel, but also a decrease in per-person spending, indicating that low-interest rates aren’t successfully stimulating consumption.

Overall, while there have been some improvements (leading even the World Bank to raise China’s growth expectation from 4.5% to 4.8% this year), the results do not seem to justify the initial optimism. Economists suggest that monetary stimulus is insufficient because China doesn’t face a liquidity problem. They recommend implementing expansionary fiscal policy, something the government doesn’t seem to have in mind for now.

The U.S. Grows, but inflation data disappoints.

One of the big global economic questions is whether the U.S. will achieve a "soft landing," meaning reducing inflation without entering a recession. This week brought both good and bad news. On one hand, the economy added 245,000 new jobs, far exceeding the 140,000 expected by the market.

On the other hand, inflation remains slightly above the 2% annual target, with a monthly increase of 0.2% in September (vs. 0.1% expected), and core inflation rising 0.3% (vs. 0.2% expected). In light of this data, it remains to be seen whether the Federal Reserve will continue its rate-cutting path or decide to pause.