It’s been a steady past week on the LME, with financial markets focusing on news out of Europe and the fluctuating oil price. In Australia all attention today will be on the RBA board meeting with an expected movement on the AUD/USD depending on the decision.
Attention in China has now turned to possible Government Stimulus programs such as an easing in official interest rates as well as the Chinese New Year which starts on Feb 19 (very late this year).
**** DJ Copper Closes Up On China Stimulus Hopes **** By Ese Erheriene
LONDON–Copper futures closed slightly higher on the London Metal Exchange on Monday as market speculation that more Chinese monetary stimulus might be forthcoming lifted red metal prices.
The LME’s three-month copper contract was up 0.1% at $5,500.00 a metric ton at the PM kerb close– having reached an almost one-week high during the session at $5,548 a ton.
Weaker-than-expected Chinese PMI data released Sunday has “fueled more hope for policy easing,” said Robin Bhar, a metals analyst at Societe Generale.
The Asian country’s official manufacturing PMI declined to 49.8 in January, from 50.1 in December – its first contraction since 2012.
As China is the biggest consumer of the red metal, its economic fortunes are often mirrored by prices. When its economy is in poor shape, copper demand declines and prices fall. Financial stimulus would likely rejuvenate the economy, meaning greater demand and higher prices.
Additionally, the weak prices in copper recently have seen lots of open short positions holders now needing to run for cover. “The last month we’ve seen prices become oversold…that’s prompted a bit of short-covering,” said Mr. Bhar.