Copper pulls back from two-week high amid US dollar rebound, Chinese growth fears

  • Copper parries gains after refreshing off its 13-day high on risk aversion, concerns over major Chinese consumers remind sellers.
  • Hawkish Fedspeak, the cautious mood ahead of key data/events is weighing on market sentiment.
  • Prolonged shutdowns and geopolitical headlines are raising concerns about China’s economic growth.

Copper prices on COMEX futures bear the brunt of risk aversion, as well as clouds over Chinese demand, falling from a more than two-week high at $4.30 before Tuesday’s European session.

Elsewhere, the three-month benchmark copper on the London Metal Exchange (LME) fell 0.4% to $9,510.50 a tonne, as of 0217 GMT by Reuters, after hitting its highest level since the May 5 at $9,565 on Monday. Additionally, June’s most active copper contract on the Shanghai Futures Exchange (SFE) rose 0.2% to 72,150 yuan ($10,827.48) per ton, according to the news.

Recent hawkish comments in favor of monetary policy tightening from San Francisco Federal Reserve Chair Mary Daly and Kansas City Fed Chair Esther George appear to be putting downward pressure on sentiment of the market. Additionally, concern over preliminary readings of the US S&P Global Manufacturing and Services PMIs for May, as well as a speech by Fed Chairman Jerome Powell, are also weighing on risk appetite.

Along the same lines, US Trade Representative (USTR) Katherine Tai poured cold water on expectations that Sino-US jitters would soon be assuaged, at least over trade concerns. The US diplomat said: “We are still working on next moves with China,” while dismissing optimism over US President Joe Biden’s comments suggesting a reversal of Trump-era tariffs on China.

It should be noted that Reuters points to the covid-induced lockdowns in China as the main headwind to the latest weakness in copper. “Beijing has extended its work-from-home requirement to stem a COVID-19 outbreak, while Shanghai has rolled out more testing and restrictions to maintain its hard-earned ‘zero COVID’ status after two months of lockdown,” the officials said. news.

Recently pessimistic growth forecasts from JP Morgan and Goldman Sachs have also challenged China’s outlook.

As risk catalysts and concerns over China’s economic growth keep copper prices down, the dragon nation’s willingness to introduce more measures to weather pandemic-related economic woes is keeping copper buyers from hopeful metals. “China will expand tax credit refunds, defer social security payments and loan repayments, roll out new investment projects and take other measures to support the economy, state television said on Monday. state quoting the cabinet,” Reuters said.

In summary, copper prices should improve gradually, but the latest risk aversion could hamper recovery moves.

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