By Jim Williams
Copper opened this morning at $2.23 a pound after finishing up, ironically enough, a penny on Tuesday.
The red metal was boosted by a weaker dollar. The Wall Street Journal Dollar Index, which measures the dollar against 16 other currencies, was recently down 0.2% 87.87.
Copper has also benefited in recent weeks from expectations of further stimulus in China, the world’s largest copper consumer. While recent data on China’s copper imports also boosted optimism over strong demand, some analysts remain concerned about the sustainability of copper’s gains.
Other Key Factors
This is Wall Street’s busiest week for corporate earnings reports, with 203 members of the S&P 500 opening their books for all to see. So far, earnings have been better than expected. According to FactSet, 68% of the companies that have reported have beat expectations.
This is surprising because of everything that has happened in the markets this year. Most notably, Britain’s decision to leave the EU. Since Brexit, the S&P 500 has surged 3.3%. The index is at 19 times expected earnings, which is historically high: It typically trades at 14 to 16 times expected earnings.
“We have moved very far, very fast after the U.K. vote,” said David Lebovitz, a global market strategist at JP Morgan Asset Management. “We are going to need a bit of time to find the market’s new neutral spot after this run-up.”
“Investing in copper post-Brexit was a good entry point, plus the Chinese copper import data probably incentivized traders to get in,” Lara Magnusen, a portfolio manager at Altegris Advisors adds. “Copper was so beaten down that money managers saw that as a good short-term buying opportunity to get in at a low price. But all the news we’ve seen recently is not bullish for copper. You’ll probably see a shift in positioning soon.”
Today’s Fed Announcement…China’s PMI Looms Next Week
All eyes are on the Federal Reserve today as it wraps up its two-day policy meeting. All signs point to interest rates staying put.
Regardless of what happens with the Fed, the price of copper will likely continue to bounce back and forth—a penny here, two cents there, until we see the Chinese manufacturing PMI data, which is due out on Monday. We should know a lot more then about which direction the penny will bounce.
Tagged with copper, tED