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Copper Continues to Claw Back

Copper Continues to Claw Back

U.S. copper investors woke up this morning to some much needed good news. Overnight trading in London saw copper prices climb for a second session as the red metal continues to try and bounce back from the two-month lows that were hit last week.

Copper for March delivery closed Friday at $3.050 a pound – ending the week down 4.75%. It was the lowest close since mid-December and the largest weekly percentage decline since November 2014. Copper opened this morning near $3.13 a pound.

Three-month copper on the LME was up 1.4 percent at $6,925 a ton, just below the hypothetical make-or-break threshold of $7,000.

Inventories in LME-registered warehouses have fallen slightly but remain near the highest in a year after rising from 200,000 tons in mid-January to more than 330,000 tons, suggesting supply is not an issue.

This week’s reversal, even though it’s only been two days, has been fueled by a weaker dollar. The dollar index slid yesterday by 0.3 percent. A weaker dollar makes metals cheaper for holders of other currencies and can support prices. Plus, many investors are jockeying for a better position prior to the Lunar New Year holiday. The holiday, which officially starts Thursday, will see China – the world’s top copper consumer – and the Shanghai Futures Exchange (ShFE) shut down for a week.

Citi released a report yesterday in advance of the Chinese New Year. In the report Citi said Chinese demand for metals and supply constraints should be supportive in 2018, while recent price strength looks to be a function of global growth and demand.

“(However) while we expect housing-related metals demand to stay fairly robust, potential slowdown of power infrastructure and machinery spending appears worrisome,” the report said.

All eyes will be on the U.S. infrastructure after President Donald Trump unveiled his long-awaited budget plan on Monday. The $4.4 trillion budget proposes deep cuts to several federal agencies, historic increases in military funding and billions for a border wall with Mexico. We will keep an eye on the budget process and see what impact it has on the price of copper.

Investing.com has compiled a list of significant events likely to affect the markets this week:

Tuesday, February 13

Australia is to publish data on business confidence.

The UK is to release data on inflation.

Wednesday, February 14

Japan is to release preliminary data on fourth quarter growth.

New Zealand is to release a report on inflation expectations.

The euro zone is to publish a revised estimate of fourth quarter economic growth as well as a revised estimate on inflation for January.

Later in the day, the U.S. is to report on consumer price inflation and retail sales.

Thursday, February 15

Financial markets in China will be closed for a holiday.

Australia is to publish its latest employment report.

The U.S. is to release data on producer prices, industrial production, jobless claims and manufacturing activity in the Philadelphia and New York regions.

Friday, February 16

Financial markets in China will remain closed for a holiday.

The UK is to release data on retail sales.

Canada is to report on foreign securities purchases and manufacturing sales.

The U.S. is to round up the week with data on building permits, housing starts, import prices and a preliminary look at consumer sentiment.

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Jim Williams

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