Iron ore prices go ballistic as metals boom

As investors place bets on the economic recovery, there’s a new frenzy that’s taken over markets. Around the world, there’s a rush to buy metals.

What’s happening: China’s benchmark iron ore futures rallied an eye-popping 10% to a record high on Monday.

“The demand picture in China is very buoyant,” Warren Patterson, head of commodities strategy at ING, explained. Outside China, the economic situation is also looking “more optimistic,” putting a strain on iron ore supplies.

Additionally, there are strong incentives for factories in China to ramp up steel production, which requires iron ore, Patterson told me. Geopolitical tensions between China and Australia, a key supplier of raw materials, are a factor, too.

The explosion in iron ore prices comes amid a broader metals boom. The price of copper also hit an all-time high on Monday, while steel prices are roughly triple their 20-year average. The Bloomberg Commodity Spot Index, which is at its highest level in a decade, has risen in 14 of the past 15 trading sessions.

Investor insight: Metals mania is great news for the stocks of mining companies, which are up sharply. Rio Tinto shares rose more than 3% in London on Monday, while Glencore’s stock is 2% higher.

But Patterson expressed concerns about just how long the buying spree can last — especially because a growing number of professional investors are piling in.

“We’re seeing a lot more speculative and investor money coming into the iron ore market and the broader commodities complex,” he said.

Anxiety on Wall Street about inflation is pushing traders to consider hedges. And when there are worries about rising prices, investors tend to favor physical assets that can act as a store of value — like metals.

The run-up may have gone too far, though, creating a painful bubble that could be about to pop.

“I struggle to see a number of metal prices sustaining this move,” Patterson said. “We’re getting to a stage where prices are not aligned with the fundamentals.”

Speaking of higher prices: A cyberattack forced the largest US fuel pipeline to shut down Friday, and analysts are worried the disruption could result in a spike in gas prices. The Colonial Pipeline system spans more than 5,500 miles and transports about 45% of all fuel consumed on the East Coast.

Dogecoin tumbles after Elon Musk’s SNL jokes

Turns out that shoutouts from Elon Musk aren’t always helpful for dogecoin.

After pumping up the meme cryptocurrency in the lead-up to Musk’s Saturday Night Live appearance, investors sold off dogecoin sharply after the Tesla CEO joked about it on the show and referred to it as “a hustle.”

Dogecoin was down 40%, trading as low as 44 cents early Sunday. The cryptocurrency was selling for about 66 cents just before SNL went on the air Saturday evening.

It was trading at 51 cents early Monday.

Remember: Musk has been the loudest and most prominent supporter of dogecoin. He frequently tweets about the cryptocurrency, and just one of his bizarre missives to his 50 million followers can trigger a huge price jump.

It’s unclear what drove the dogecoin selloff. Perhaps investors wanted Musk to say something more supportive of the digital coin — or maybe it was just another example of its notorious volatility.

Watch this space: Dogecoin was trading so actively that Robinhood announced early Sunday morning it was having problems processing crypto trades. The app has since resolved the issues.

To the moon: While dogecoin struggles, ethereum is skyrocketing again. The cryptocurrency was last up 17%, hitting an all-time high of more than $4,180 on Monday.

Why Peloton could initially refuse to recall its treadmills

You’d think that federal safety regulators would have broad powers to order the recall of products they find dangerous or even deadly.

You would be wrong, my CNN Business colleague Chris Isidore reports.

Agencies such as the Consumer Product Safety Commission and the National Highway Traffic Safety Administration typically can only request — not demand — that companies order a recall when problems arise. If the company says no, safety watchdogs have to file lawsuits to force the matter, a step they are loath to take, according to experts.

“You do see a lot of companies recognize that it is in their interest to do a recall. But there are a lot of times companies don’t do a recall, and you have a fight that largely takes place outside the public eye,” said William Wallace, manager of safety policy for Consumer Reports.

That toothlessness has been on full display with Peloton’s treadmills.

US regulators issued an “urgent warning” for people with young children or pets to stop using the machines after confirming one child’s death and 70 other injuries. It took nearly three weeks for the company, which estimates the recall will cost about $165 million in lost sales, to finally take action. Its CEO apologized for the delay last week.

Investor insight: Peloton’s shares are down almost 15% this month and have dropped 45% since the start of the year.

Up next

Coty, Marriott, Tyson Foods and Weibo report results before US markets open. Novavax, Roblox, SmileDirectClub and Wynn Resorts follow after the close.

Coming tomorrow: US inflation data for April will be closely scrutinized as investors monitor rising prices.