Copper gains capped by prolonged US-China trade dispute

LONDON: Copper prices rose on Monday as traders and funds reversed bets on lower prices, but the protracted US-China trade dispute and subsequent damage to global growth and demand capped gains.

Benchmark copper on the London Metal Exchange was untraded in official rings, but bid up 0.4% at $5,928 a tonne.

"The resolution, or otherwise, of the trade talks between the United States and China are of meaningful importance to base metals markets," said Guy Wolf, head of market analytics at Marex Spectron.

"Underlying physical markets are significantly more robust than the headlines would suggest they have any right to be.  That is not to suggest things are booming, nor are they looking as tight as they perhaps were earlier in the year."

REVERSAL: Traders said a break of the 21-day moving average at $5,925 triggered stop levels, which eventually took prices to a session high at $5,946.50.

Reinforcing this was a drop in copper stocks <MCUSTX-TOTAL> in LME warehouses, which fell 4,675 tonnes to 298,300 tonnes.

Funds and dealers trading headline stocks had taken bets on lower prices after LME copper inventories last week rose above 300,000 tonnes from 239,925 tonnes.

TRADE: The United States and China agreed late in June to restart trade talks after President Donald Trump offered concessions including no new tariffs and an easing of restrictions on tech company Huawei.

The Trump administration has accused China of engaging in unfair trade practices that discriminate against US firms, forced technology transfers and intellectual property rights theft, all charges Beijing has denied.

Both sides have levelled increasingly severe tariffs on each other's imports.

CHINA: Chinese manufacturers account for about half of global consumption of industrial metals, key to the direction of prices. Markets are looking ahead to China data on bank loans.

New bank loans in China are expected to have picked up to a five-month high in June, a Reuters poll showed, as Beijing kept ample liquidity in the financial system to support the slowing economy.

ZINC: Prices of the metal used to galvanise steel have recently come under pressure from expectations of rising supply and the likelihood of a second half balanced market or surplus.

Zinc was down 0.7% at $2,389 a tonne. Earlier it touched $2,386, its lowest in more than six months.

Receding worries about zinc shortages on the LME market can also be seen in the discount for the cash over the three-month <CMZN0-3> contract, which is around $2.60 a tonne, against a premium of more than $160 a tonne late May.

PRICES: Aluminium slipped 0.2% to $1,800, lead gained 1.5% to $1,897.5, tin was unchanged at $18,350 and nickel gained 0.8% to $12,580 a tonne.