Copper climbs on Chinese data, hopes of Fed rate cuts

LONDON: Copper prices rose on Monday after data from top consumer China showed stronger factory activity and US inflation data reinforced hopes of interest rates cuts by the Federal Reserve this year.

Benchmark copper on the London Metal Exchange (LME) traded 0.76% higher at $10,106 a metric ton in official rings. Chinese manufacturing activity grew at its fastest pace in nearly two years last month, helped by gains for smaller companies, a private sector survey of purchasing managers showed.

But that contrasted with a surprise fall in the broader official survey of purchasing managers. “The market has decided to run with the good news (private survey) for now,” one copper trader said. “Eyes are on what the Fed will do after the inflation data, and dollar reaction.”

Fed rate cuts would boost manufacturing activity and demand for industrial metals in the United States. They would also weigh on the US currency, weakness of which makes dollar-priced metals cheaper for buyers with other currencies.

This relationship, used by funds that trade on buy and sell signals from numerical models, was one reason behind copper’s surge to a record peak above $11,100 a ton in May.

Other reasons include macro funds, those that trade on fundamentals, also piling into the market on expectations of tight supplies and deficits.

“We would attribute the (copper) price action - both up and then, more recently, down - to macro funds and commodity traders, both physical and in the financial market,” Jeffries analysts said in a note.

“When the smoke clears and fundamental tailwinds kick in, most likely in 2025, the price should resume an upward trend, but we would expect more volatility in the very near term.”

A likely source of volatility is Chinese data that includes trade numbers this week and could yield clues to demand prospects for industrial metals. In other metals, aluminium was up 0.6% at $2,668 a ton, zinc rose 0.2% to $2,976 and lead advanced 0.3% to $2,279, while tin retreated 0.7% to $32,800 and nickel lost 0.7% to $19,565.