A write-off of more than a tenth of operating assets is not cause for celebration. On Thursday South 32, the mining group recently spun out of BHP Billiton, said it will take a write down of $1.7bn to reflect changes in the outlook for commodity prices. The company will also cut jobs and expenditure plans. The stock rallied 14 per cent, taking the rest of the sector with it; peers Rio Tinto and BHP jumped too.

There was more to the price moves than excitement at South 32’s display of rational behaviour. Overnight, New York Fed president Bill Dudley publicly fretted about tight financial conditions. Weak service sector data confirmed suspicions that the US economy remains vulnerable, and that further rate rises should be on hold. The dollar slumped nearly 2 per cent against a trade weighted basket of currencies, from recent levels near 13-year highs. The logic behind a commodity stock rally therefore might be that cheaper dollars make dollar-priced products less expensive. While true, this does not set up conditions for a recovery. Appetite for hard commodities cannot be stoked by cheap prices alone, and a weaker US risks compounding the China slowdown.

There may be another reason for the rally, which had a whiff of panic about it. At the end of last week, the number of BHP and Rio shares sold short in the Australian market were near three years highs, data from the Australian Securities and Investments Commission and Bloomberg show. While small as a proportion of outstanding shares (less than 3 and 2 per cent for Rio and BHP, respectively), shorts in both amount to several days of trading, based on 30 day average volumes. South 32 shares are even more hated: its shorts are at the highest since listing and would require six days of trading to cover.