LONDON: Copper prices retreated on Thursday, hit by tense geopolitics, a strong dollar and uncertainty about how soon China’s stimulus measures would impact physical demand.
Three-month copper on the London Metal Exchange was down 0.8% at $10,007 per metric ton by 0945 GMT, having gained 1.1% in the previous session.
Conflict raged in the Middle East as Israel continued to bomb Lebanon and the president of Iran was defiant after his country fired missiles into Israel.
“There’s a little nervousness creeping into the market because of all the things that are going on in the world,” said Dan Smith, head of research at Amalgamated Metal Trading.
“But I think this is a temporary pause. I think investor sentiment will dominate over the next two to three months. There’s more to go in terms of buying into China’s big bazooka.”
Copper makes gains on hopes for more China stimulus
In recent weeks, top metals consumer China has taken action to boost economic growth including cutting interest and mortgage rates, injecting liquidity into banks and easing home purchase restrictions.
Others, however, were more wary about the impact of China.
“The policy stimulus effect to copper in the short term is almost finished. We saw the stock accumulation in China for the first time in September,” said analyst Matt Huang at broker BANDS Financial.
He was referring to a rise this week in copper inventories in warehouses tracked by Shanghai Futures Exchange, the first since the week starting July 1.
Another sign of healthy supply was a discount of $141.16 a ton of the LME cash contract versus the three-month contract, the biggest discount since July 17.
Trading volumes were thin as markets in China were closed for a week-long public holiday.
LME aluminium dipped 0.4% to $2,668.50 a ton, pulling back from a four-month peak of $2,694 hit earlier in the session. On Wednesday, the LME said it was monitoring tightness in the aluminium market.
Among other metals, LME nickel added 0.7% to $18,275 a ton, zinc dipped 0.1% to $3,169.50, lead slipped 0.4% to $2,143 and tin eased 0.2% to $33,835.