LONDON: Copper prices recovered on Wednesday from a one-month low after data showing China fell into deflation fuelled hopes for more stimulus in the world’s top metals consumer.
Three-month copper on the London Metal Exchange was up 1% at $8,431 per metric ton by 0945 GMT after hitting the lowest since July 7 on Tuesday.
China’s consumer sector fell into deflation and factory-gate prices extended declines in July, data showed on Wednesday, raising more pressure on Beijing to boost policy stimulus.
““We had another piece of bad news with the headlines showing deflation, raising expectations that the Chinese government will eventually have to step in and do something to arrest this slide,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
The market is wary, however, after prices rallied several times over the past months and were disappointed with modest stimulus measures, he added.
Copper skids to lowest in almost a month on Chinese trade data
“There’s been a lot of false starts over the last six months so the bounces we’re seeing may become more and more shallow simply because the market wants to see the facts before they get too carried away,” Hansen added.
The most-traded September copper contract on the Shanghai Futures Exchange closed down 0.4% at 68,600 yuan ($9,517.20) per metric ton.
Also bolstering industrial metals was a retreat in the dollar index on improved risk sentiment and dollar selling by some Chinese banks, making greenback-priced metals cheaper to holders of other currencies.
The premium of the LME cash zinc contract over the three-month contract has surged to $30.25 per metric ton, the strongest since late April, having moved from a discount of $20.25 in mid-July, indicating nearby supply tightness.
LME aluminium edged up 0.1% to $2,203 per ton, zinc advanced 0.2% to $2,460, tin was flat at $27,300 while nickel edged up 0.6% at $20,965 while nickel fell 0.1% to $20,815 and lead dipped 0.1% to $2,122.
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