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Starting in late May, returns to Asian emerging markets have become closely correlated with the price of copper. The closest correlation is with the MSCI China index, at almost 80%.

The close correlation between copper and Asian equity markets (and the much lower correlation with other emerging markets) should put to rest the assertion that copper is falling due to contagion from Turkey’s economic crisis. Turkey simply is too small to matter. The copper market cares about China and other Asian economies.

Copper, often viewed as a proxy for industrial and construction activity, has given up its gains of the past year during the last several months, although it remains well above the 2014-2015 lows.

The fact that the fall in the copper price was increasingly correlated with Chinese equity returns strongly suggests that the metal’s weakness reflected the market’s fear of trade war and its consequences. A slowdown in Chinese growth due to trade war would also affect the largest component of copper demand.