Copper prices rose after data from top consumer China showed stronger factory activity and US inflation data bolstered hopes for interest rate cuts by the Federal Reserve. this year.
Benchmark copper on the London Metal Exchange (LME) rose 0.6% to $10,099 a metric ton at 1005 GMT.
Chinese manufacturing activity grew at its fastest pace in nearly two years last month, helped by profits at smaller companies, a private sector survey of purchasing managers showed. But that contrasted with a surprise drop in the broader official survey of purchasing managers.
“The market has decided to ride the good news (private survey) for now,” said one copper trader. “Eyes are on what the Fed will do after the inflation data and on the dollar’s reaction.”
The Fed’s rate cuts would boost manufacturing activity and demand for industrial metals in the United States. They would also weigh on the U.S. currency, whose weakness makes metals priced in dollars cheaper for buyers in other currencies.
This relationship, used by funds that operate based on buy and sell signals from numerical models, was one of the reasons for copper’s rise to an all-time high above $11,100 per ton in May.
Other reasons are macro funds, those that trade based on fundamentals, also piling into the market on expectations of supply shortages and deficits.
“We would attribute the (copper) price action – both up and, more recently, down – to macro funds and commodity traders, both physical and in the financial market,” the Jeffries analyst said in a note. .
“When the smoke clears and fundamental tailwinds kick in, most likely in 2025, the price should resume an uptrend, but we would expect more volatility in the very short term.”
A likely source of volatility is Chinese data including trade figures this week that could provide clues to the outlook for industrial metals demand.
In other metals, aluminum rose 0.8% to $2,674 a ton, zinc rose 0.2% to $2,974 and lead gained 0.5% to $2,284, while tin fell 0. 8% to $32,780 and nickel lost 1% to $19,515.
