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Data released on Tuesday showed China’s fixed-asset investment growth slowed to 5.5% in the first seven months of the year, compared with an expected print of 6.0%. The country’s industrial production in July was flat with the previous month at 6.0%, but down from the 6.3% forecast. Chinese retails sales last month were also lower than expected at 8.8% compared to June’s 9.0% and the July forecast of 9.0%. The July unemployment rate rose to 5.1% compared with 4.8% in June.
The weaker-than-expected data out of China follows a collapse in the Turkish lira against the dollar which fueled currency volatility and further rattled the already tenuous market sentiment.
Although the Turkish currency has recovered and was seen trading at 6.56 against the dollar on Wednesday morning, compared with 6.87 to $1 on Tuesday according to Oanda.com, Metal Bulletin analyst Andy Farida noted that “overall buying sentiment in the base metals complex remains fragile while metal prices continue to hover near 2018 lows.”
“The lack of dip-buying momentum is fueled by the poor Chinese economic data while the limited downside pressure is kept in check by a stabilized currency market,” he added.
Copper fell the most this morning, with its most-traded October contract on the SHFE dropping 1.2% from its closing price on Tuesday.
This morning’s weakness comes on the back of news that BHP and the worker’s union at the world’s largest copper mine by production, Escondida, have agreed to resume negotiations – delaying a strike that was expected to start on Tuesday and easing concerns of supply disruptions.
“The union said that both sides had made enough headway on issues that had stalled negotiations that they gave themselves another day to resolve the remaining points. The easing concerns of supply disruptions permeated through the rest of the sector,” ANZ Research noted on Wednesday.
Zinc, which gave the worst performance on Tuesday, showed a slight decrease in the early session on Wednesday with a fall of 0.4% in its most-traded October contract on the SHFE.
Persistent dollar strength continues to pressure the SHFE base metals complex as a whole, with the US currency trading at 96.76 as at 9am Shanghai time on Wednesday, near the high of 96.80 reached on Tuesday, which was a fresh 2018 high.
Base metals prices
Currency moves and data releases