Copper rallies as US growth fears ease and China inventories fall

LONDON: Copper prices bounced on Friday after US jobs data eased fears of a growth slowdown in the United States, while falling inventories in top consumer China reinforced positive sentiment. Benchmark copper on the London Metal Exchange (LME) was up 0.5% at $8,831 a metric ton as at 1617 GMT, after hitting a 4-1/2 month low of $8,714 earlier this week on concern about the contagion effects of a potential recession in the United States.

Americans filing new applications for unemployment benefits fell more than expected last week, data showed on Thursday, suggesting nervousness about the labour market was overblown.

Traders said inflation data showing China taking a step back from deflation also underpinned the improved mood across equities and commodities markets.

“US jobs data lifted sentiment, copper is following equities,” one metals trader said, adding that falling stocks in warehouses monitored by the Shanghai Futures Exchange (ShFE) also provided support.

Copper stocks in ShFE warehouses have dropped 15% over the past two months to 286,305. Hopes for a recovery in China’s copper consumption were highlighted by the Yangshan premium, a closely watched indicator of China’s import appetite, rallying to about $55 a ton this week for its highest since March.

“Lower prices have seen (Chinese) demand start to pick up, with wire and cable companies reporting an increase in orders, but this is still muted,” Macquarie analysts said.

Traders are awaiting July data on China’s new yuan loans and total social financing, viewed as an indicator of future industrial metals demand. Both are due over the next few days.

Elsewhere, lead gained 3.6% to $2,036 a ton, while its sister metal zinc advanced 3.3% to $2,734 a ton, as momentum picked up after a sustained break of the 200-day moving average around $2,660.

Buying was triggered by expectations of higher energy costs, which account for about 50% of zinc production costs, a trader said.

In other metals, aluminium rose 0.9% to $2,293.5 a ton and nickel was up 0.1% at $16,155. Tin was last up 2.3% after touching a three-week high of $32,050.