Shanghai Futures Exchange copper soared 5.4 percent to finish at 48,210 yuan ($6,967) a tonne on Thursday as investors poured funds into metals in expectation of inflation in China and the United States, and on signs of growing strength in the US manufacturing sector. Investors also bought lead and zinc, with both contracts in Shangahi surging around 4.5 percent.
Bets that the US will raise rates in December and again next year pushed up the dollar, adding to the allure of commodities for investors seeking a hedge against inflation. Meanwhile, China fixed its yuan midpoint at the weakest since June 2008, which also encouraged mainland investors to chase commodities as a hedge against further dollar strength amid lower yields in other asset classes and a steadily improving fundamental picture.
"Strong durable goods orders in the US helped buoy investors who have viewed Trump's upcoming presidency as a positive for industrial metals demand," said ANZ in a report. Expectations of improved demand for copper was gaining momentum, Argonaut Securities said in a report.
"Previous pessimistic concern on copper demand in China is probably overdone. Looking ahead, the prospect of improving economic conditions in China and the US will underpin a stronger copper growth in 2017 than 2016, in our view." Demand from major consuming sectors has improved this year. Power sector demand surged 28.5 pct in the first 10 months of the year, up from 11.7 pct last year, while floor space completion, a key signal for construction demand, grew 5.7 pct year on year, up from an 8.8 percent fall last year, it noted. China consumes about half the world's copper.
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