Copper Prices Soar on Stimulus Prospects in China and Pause in US Rate Hikes
Copper prices in London have witnessed a remarkable surge, heading towards their best monthly performance since January, buoyed by the prospects of additional stimulus measures in China, the world's leading consumer of the metal, and indications that the US Federal Reserve will halt rate hikes for the year.
As of 08:12 GMT, the three-month copper contract on the London Metal Exchange experienced a minor dip of 0.1%, currently standing at $8,658 per metric ton. However, on a monthly basis, the contract registered a significant 4.1% increase, marking an impressive upturn in copper prices.
Meanwhile, on the Shanghai Futures Exchange, the most-traded September copper contract rose by 1% to 69,530 yuan ($9,729.24) per metric ton. This reflects a positive trend on a monthly basis, representing the second consecutive month of gains with a 3.6% rise.
A key factor contributing to the optimistic sentiment in the market is the US annual inflation, which recorded its smallest increase in over two years during June. This development raised hopes that the US Federal Reserve may be nearing the end of its interest rate-hike cycle. If confirmed, this could potentially halt the recent rally of the dollar, which has led to higher prices for metals priced in greenback, thus benefiting holders of other currencies.
Additionally, the dollar is currently on track for a monthly loss, adding further support to the metals market's bullish sentiment.
Pledges from Chinese authorities to bolster the country's troubled property sector, a significant consumer of metals, have played a vital role in driving positive sentiments. Market analysts have noted that any support for the property sector will likely translate into increased demand for copper, further bolstering its price.
However, it's worth noting that weak economic data in China has put some pressure on prices. Chinese manufacturing activity declined for the fourth consecutive month in July, while the services and construction sectors hovered near the brink of contraction.
Amidst these developments, other metals on the London Metal Exchange experienced mixed performances. LME aluminum rose by 0.5% to $2,234 per metric ton, zinc advanced by 0.7% to $2,514, and tin rose by 0.2% to $28,795. Conversely, lead fell slightly by 0.1% to $2,156, and nickel declined by 1.5% to $21,970.
On the Shanghai Futures Exchange, the situation was more varied, with SHFE aluminum remaining flat at 18,380 yuan per metric ton, tin experiencing a minor dip of 0.1% to 233,200 yuan, and nickel rising by 1.8% to 172,260 yuan. Zinc, on the other hand, recorded a notable 1.5% increase at 20,890 yuan.
Notably, SHFE lead demonstrated a remarkable performance in July, climbing by 3.7%, marking its best monthly performance since October 2021.
Overall, the outlook for copper remains positive, driven by the prospects of continued stimulus in China and the potential pause in US interest rate hikes, which could provide significant support to the metals market in the coming months.
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