Shanghai Futures Exchange copper surged 2.49 percent to 39,090 yuan ($6,297) a tonne on Wednesday as short sellers rushed to cover their positions amid speculation about further stimulus from China, and ahead of a policy decision from the US Federal Reserve. Gains in copper helped to spur a broader advance on the ShFE, as zinc, tin, lead and nickel, all rallied around 3 percent.
Traders said the rally was sparked by short-covering. "The market always going to be prone to a short-covering rally, but it will most likely fail all things being equal ... what has (fundamentally) changed?" said a broker in Hong Kong. The China Securities and Regulatory Commission (CSRC) said it was investigating share dumping incidents on Monday, when Chinese markets suffered their worst single-day plunge in more than eight years.
Market attention was turning to a Federal Reserve meeting later in the day for clues about the timing of a rate rise, which market consensus has pegged at September. "If the rate rise continues to be pushed out, the USD would presumably weaken a little bit and that would help commodities," said analyst Daniel Morgan of UBS in Sydney. "But that's not our base case scenario."
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