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Copper prices eased on Monday but were supported by rising imports of the industrial metal by top consumer China and by hopes that interest rates will peak soon after rapid increases aimed at curbing inflation.
Benchmark copper CMCU3 on the London Metal Exchange (LME) was down 0.2% at $7,870 a tonne by 1009 GMT. Prices of the metal used as a gauge of economic health have climbed 13% since July 15, when they touched the lowest level since November 2020 at $6,955.
“The bounce in metal prices and more broadly other risk assets comes from hopes that perhaps inflation has peaked or is possibly past its peak,” said Duncan Hobbs, research director at Concord Resources.
“By association it may mean central banks led by the Fed are at or even past the peak of hawkishness. Whether those hopes are justified is debatable; the latest U.S. jobs report was strong.”
U.S. job growth accelerated unexpectedly in July, lifting employment above its pre-pandemic level and pouring cold water on fears the economy was in recession.
Part of the reason for base metal price rises in recent weeks is funds and traders buying back short positions as the dollar retreated from historical highs against other major currencies.
A lower U.S. currency makes dollar-priced metals cheaper for holders of other currencies, which could boost demand. FRX/
China’s copper imports rose to 463,693 tonnes in July, up 9.3% from a year earlier as the sharp drop in prices triggered buying against a backdrop of falling domestic inventories.
Copper stocks in warehouses monitored by the Shanghai Futures Exchange CU-STX-SGH are down 79% since March at 34,768 tonnes, the lowest level since Jan. 28.
However, worries about copper inventories in LME-registered warehouses have receded and can be seen in the discount for the cash contract over three-month copper CMCU0-3 at about $7 a tonne.