Copper and other industrial metals prices fell on Wednesday as expected further interest rate rises turned investors cautious, pressuring growth-linked assets and boosting the dollar.
Global stock markets fell as investors focused on what the U.S. Federal Reserve might do to tame inflation, which remains stubbonly high.
Higher interest rates slow inflation by stifling economic activity, dampening demand for metals. Rising U.S. rates also lift the dollar, making dollar-priced metals costlier for buyers with other currencies.
Benchmark copper on the London Metal Exchange (LME) was down 1.3% at $8,899.50 a tonne by 1103 GMT.
Prices of the metal used in power and construction have drifted lower in recent months. They remain far above pre-COVID levels of about $6,000 a tonne but below last year’s record high of $10,845.
“The market is once again focusing on the prospects for rates and the general appetite for risk,” said Saxo Bank strategist Ole Hansen.
Hopes are fading that interest rates will soon fall, Hansen said. St. Louis Federal Reserve President James Bullard on Tuesday said that he wanted to raise rates.
Copper gains after strong Chinese growth data
Meanwhile, data on Wednesday showed that inflation pressures are still strong in Britain and the European Union while Japanese manufacturers remain pessimistic about global demand.
Prices have gained some support, however, from economic recovery in China, the biggest metals consumer.
Data this week showed that the metals-intensive property sector remains the softest spot of the Chinese economy, said Julius Baer analyst Carsten Menke.
“Growth in fixed-asset investments, which are closely tied to construction activity, moderated in the manufacturing and infrastructure sectors,” he said.
“While China is growing, it is clearly not the right kind of growth from an industrial metals markets perspective.”
LME aluminium was down 1.2% at $2,408 a tonne, zinc fell 3% to $2,786, nickel retreated by 4% to $24,620, lead was down 0.3% at $2,139.50 and tin lost 4.3% to $26,650.