- Copper struggled to extend Friday’s rebound in Japan and the UK.
- PBOC announces RRR cut, Dalian and Chengdu witness unlocking while Taiwan concerns amplify China-related fears.
- Fears of oversupply, hawkish Fed bets put downside pressure on metal prices.
Copper prices were sideways amid a sluggish start to the key week as traders struggled to justify mixed catalysts from holidays in Japan and the UK.
Three-month copper on the London Metal Exchange (LME) was up 0.5% at $7,804 a tonne by 03:25 GMT, per Reuters, while the most-traded October copper contract on the Shanghai Futures Exchange (SFE) advanced to 1. % to 62,650 yuan ($8,940.42) a ton. In contrast, COMEX futures were down 0.60% by press time.
US President Joe Biden’s comments that he is more optimistic than me initially favored the red metal. National leaders have said that they are going to bring inflation under control. Along the same lines, Covid updates from China unlock the cities of Dalian and Chengdu and witness zero coronavirus cases in Beijing as against zero outside the quarantine zone of Shanghai the previous day. However, US President Biden’s readiness to support Taiwan if China attacks Taipei and hawkish promises to the Fed appear to weigh on steel prices ahead of key monetary policy announcements.
Further, the People’s Bank of China (PBOC) will cut the 14-day reverse repo rate by 10 basis points (bps) to 2.15%. “With no reverse repos maturing on Monday, China’s central bank injected 12 billion yuan a day,” per Reuters. The same may indicate that the dragon nation is not in recovery mode and needs more rate cuts than rate hikes, which in turn could sink gold prices. The reason is China’s status as one of the world’s largest gold consumers.
Elsewhere, hawkish promises from the Fed weighed on metal prices, especially amid fears of a recession. On Friday, the University of Michigan’s preliminary reading of consumer sentiment for September came in at 59.5, down from market forecasts of 60.0 from 58.6 in the previous month. With the strong US data, the odds of a 75 basis points (bps) rate hike by the Fed rose to around 80% while market expectations for a full percentage point hike in the Fed rate rose to 20% in recent days.
Looking ahead, headlines around China may entertain copper traders but key focus will be on central bank actions in the US, UK and Japan as the former two have bearish prospects and could sink metal prices.
Also Read: Steel prices rebound on Covid updates, China’s Fitch’s comments