LONDON: Copper prices rose on Thursday as the U.S. Federal Reserve tempered expectations for larger rate increases in future, reviving appetite for riskier assets.
The U.S. central bank on Wednesday raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, to fight soaring inflation.
Fed Chairman Jerome Powell however sounded a less hawkish tone than some had feared in his accompanying comments, and said the U.S. central bank was not “actively considering” a 75 basis-point rate hike.
The Fed’s dovish stance led to a risk rally in equities and commodities, said Amelia Fu, Bank of China International’s (BOCI) head of global commodities strategy.
“Risk-on sentiment is tentatively back on the back of the Fed’s comments.”
Benchmark copper on the London Metal Exchange (LME) rose 1.2% to $9,584 per tonne by 1030 GMT. The metal used in power and construction was still on track for its third weekly decline.
INVENTORIES: Copper stocks in LME-approved warehouse rose by 14,325 tonnes to 168,800 tonnes. Inventories have more than doubled from February, when they reached their lowest since 2005.
POSITIONS: Funds are betting that copper will fall, as evidenced by rising short positions in Comex copper, said brokerage Marex.
As of May 2, the Comex copper short was the largest since April 2020, totalling 24,000 lots or 13.5%, it said.
CHINA ACTIVITY: Activity in top metals consumer China’s services sector contracted at the second steepest rate on record in April amid COVID-19 curbs, a private-sector survey showed.
Manufacturing activity in China also slowed in April due to a COVID-19 outbreak, clouding the outlook for base metals demand.
ALUMINIUM: Rio Tinto said any sanctions on Russian aluminium producer Rusal following Moscow’s invasion of Ukraine would significantly disrupt the aluminium market and drive prices up.
REFINED SUPPLY: Global copper and nickel smelting activity rose in April even as a COVID-19 lockdown intensified in top producer China, data from satellite surveillance of metal processing plants showed on Wednesday.
OTHER METALS: LME aluminium rose 0.2% to $2,959 a tonne, zinc added 3% to $3,977, lead rose 0.9% to $2,302, tin slipped 0.2% to $40,550 and nickel shed 0.6% to $30,455.