Copper edges higher despite persistent macro headwinds

Copper advanced on Tuesday after a sharp selloff in the previous session, even as a strong dollar, elevated oil prices and concerns about Chinese demand kept a cap on bullish sentiment.

Benchmark three-month copper on the London Metal Exchange rose 0.34% to $14,461.50 a metric ton, while the most-traded copper contract on the Shanghai Futures Exchange edged up 0.09% to 109,530 yuan ($16,335.08) a ton by 0332 GMT.

LME copper fell 1.4% on Monday, touching $14,343, its lowest in more than ten days, after weak Chinese industrial profits data added to pressure from rising oil prices and a stronger dollar.

Traders are also awaiting China’s manufacturing purchasing managers data due later this week for further signals on metals demand.

Meanwhile, restocking activities before China’s seven-day National Day holiday that’s set to begin on Thursday are slowing, adding to demand worry.

“Downstream copper users in China have largely completed pre-holiday restocking and are buying only as needed after the recent price decline,” analysts at Chinese broker Galaxy Futures said.

Oil prices and the US dollar traded strong.

Brent crude hovered above $106 a barrel, extending gains as concerns over Middle East supply disruptions persisted.

Higher oil prices have strengthened inflation concerns and expectations that US interest rates could stay higher for longer.

The dollar index hovered near a two-month high, supported by rising Treasury yields.

Markets were pricing in more than a 70% chance of another Federal Reserve rate increase in October.

Higher interest rates associated with slower economic activity typically crimp demand for copper.

Among other LME metals, aluminium rose 0.43%, zinc gained 0.26% and lead added 0.34%, while nickel and tin both slipped 0.09%.

On the SHFE, aluminium rose 0.02%, zinc gained 0.42%, lead advanced 0.43% and tin climbed 0.49%, while nickel dropped 0.73%.