Few things get futures and commodities brokers jumpier than the rumor of a new government investigation into an entire market – and whispers in the Shanghai Futures Exchange appear to have spooked the rubber market there.
The chaos, reports the the Wall Street Journal's China Real Time Report, began with a rumor that a major Chinese brokerage had dumped large futures positions in raw rubber. Soon, traders were saying that the government in Beijing was cracking down on illicit loans backing futures trades.
The problem? None of this was true. There is no investigation, the China Securities Regulatory Commission (Beijing's equivalent to the Securities and Exchange Commission) isn't investigating rubber futures and the brokerage where the rumors started, called Dadi Futures, has said "everything is normal."
But in the blink of an eye, rubber futures dropped 4.7 percent, reports the WSJ, close to the daily movement limit of 5 percent. As commodity brokers realized that they had been fooled by rumors, the futures recovered some of the lost ground, ending the day down 2.7 percent.
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