Comex copper rally stalls in broad-based downturn

Comex copper prices were on pace to end the week on a dour note amid a combination of poor Chinese data and the dollar inching higher.

Copper for March delivery on the Comex division of the New York Mercantile Exchange (Nymex) fell 0.35 cents or 0.1% to $2.6680 per lb. Trade has ranged from $2.6420 to $2.6710 per lb.

Overnight, Chinese macroeconomic data disappointed – the dollar-denominated trade deficit was $40.8 billion while in yuan terms it was a sub-par 275 billion yuan.

“Right now, we are seeing a relatively mixed tone in the group, with lead leading the complex in terms of the winners,” INTL FCStone analyst Edward Meir said.

Looking ahead, markets are expected to grow jumpy next week ahead of US President-elect Donald Trump’s inauguration. Plus, the Chinese New Year begins on January 28, which should reduce liquidity, leading to outsized price movements.

Copper prices drift

  • Copper has been on a rollercoaster the past couple of sessions with prices hitting a one-month high yesterday before succumbing to selling pressure today.
  • Still, investors are bullish after a week of mostly positive Chinese data and possible supply disruptions at Chile’s Escondida mine.
  • “There is also a lingering downside risk technically, the rally is developing signs of a potential top and is vulnerable to a deeper setback if prices fail to take out the November 2016 high. But without confirmation from its price action, we will maintain our cautiously bullish bias for now,” Metal Bulletin analyst Andy Farida said.
  • Chinese imports of unwrought copper and copper products rose 29% month-on-month to 490,000 tonnes in December, the highest level since March 2016. Still, year-on-year, imports were down 8%.
  • China’s imports of unwrought copper and copper-fabricated products totalled 4.95 million tonnes in 2016, up 2.9% on the previous year, according to preliminary customs data released on Friday January 13.

Currency moves and data releases

  • The US dollar index stood at 101.45, up 0.1% against last session’s close.
  • The central bank of China recently set the yuan middle rate against the US dollar at 6.8909, slightly stronger than 6.9141 on Thursday.
  • In data, Core retail sales month-over-month in November rose 0.2%, below the forecast of 0.5%. Retail sales over the same period exceeded expectations with a 0.6% uptick, 0.5% was called for.
  • The production price index (PPI) for December increased 0.3% month-over-month, besting the projection of 0.1%. Meanwhile, core PPI – excluding food and energy components – failed to meet predictions of a 0.3% rise, coming in at 0.2%.

 

(Editing by Lau Wei Jun)