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Copper Has A Short Fuse

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Copper Has A Short Fuse

Copper prices fell to their lowest level in nearly a year, thanks in large part to weak global manufacturing data and a rising dollar. The red metal reacted quickly after China released its Caixin manufacturing index Monday.

The Caixin report showed a drop in China’s manufacturing sector in June. This adds to the elephant in the room – trade tension between China and the United States. “Investors are taking risk off the table because of trade tensions, which threaten Chinese exports to the United States and also their profit margins,” SP Angel analyst John Meyer told Reuters. “Industrial metals rely on China.”

“For now, we remain of the view that a large scale “trade war” remains a low probability, though the odds of it happening have clearly increased,” JPMorgan analysts said in a note. “Acknowledging the rising trade risks, we have no exposure to the base metals complex.”

Copper is nearly at a seven-month low as it opened below the $3 per pound level this morning.
Prices have tumbled more than 10 percent since June 7.

Reflecting on Q2, Looking Ahead to Q3

As the calendar turned to July over the weekend and the nation gets ready to celebrate Independence Day, we look to frequent tED contributor Andrew Hecht of Seeking Alpha for a look back at the second quarter, and a look ahead to Q3.

“Trade issues dominated the business news cycle during the final weeks of Q2 and are likely to continue to move markets into Q3,” states Hecht. “If the current environment of trade tension leads to new bilateral deals with China, Canada, Mexico, the European Union…we could see an economic boom that fosters higher commodities prices over coming months.

“We are currently at a juncture where prices can go either way depending on the outcome of the ongoing saga of international trade. I expect a continuation of volatility in markets across all asset classes in 2018 than we saw in 2017 the potential for a risk-off period has increased because of trade issues facing markets,” concludes Hecht.

 

The (Holiday) Week Ahead

Investing.com has compiled a list of significant events likely to affect the markets over this 4th of July shortened week, including the Fed releasing the minutes from their June meeting. Here is the list:

Tuesday, July 3

New Zealand is to release data on business confidence.

Australia is to report on building approvals and the Reserve Bank of Australia is to announce its benchmark interest rate and publish a rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

The UK is to release data on construction activity.

Wednesday, July 4

Australia is to produce data on retail sales and trade.

China is to release data on the Caixin services index.

The UK is to release data on service sector activity.

Financial markets in the U.S. will be closed for a holiday.

Thursday, July 5

Bank of England Governor Mark Carney is to speak.

The U.S. is to release the ADP nonfarm payrolls report as well as the weekly report on initial jobless claims and the ISM is to publish its non-manufacturing index.

Later in the day, the Federal Reserve is to publish the minutes of its June meeting.

Friday, July 6

The UK is to publish an industry report on house price inflation.

Canada is to publish its latest employment report.

The U.S. is to round up the week with the nonfarm payrolls report for June.

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Jim Williams

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