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Copper Report: China and Iran Making Headlines

Copper Report: China and Iran Making Headlines

London copper rose for a fourth session on Tuesday on expectations that Chinese data in the weeks ahead will show the economy in the world’s top metals consumer remained strong in April.

Three-month copper on the London Metal Exchange climbed 0.5 percent to $6,857 a ton. Per pound, the red metal still sits above the $3 plateau. This after showing a subtle gain of 0.66% last week.

Growth in China’s service sector picked up in April as new business and employment grew at a faster rate, a private survey showed on Friday, signaling a solid rise in a sector that China is counting on to maintain economic growth. Reports released this morning show that China’s surplus with the U.S. expanded to $22.19B – compared with a surplus of $15.43B in March.

Experts say the expanded surplus was underpinned by a pick-up in industrial output and a rebound in exports despite rising trade tensions with the United States.

Speaking of which, China’s top economic official is scheduled to visit Washington next week to resume trade talks with the Trump administration after discussions in Beijing last week failed to produce agreement on a long list of U.S. trade demands.

Trade Talks in the Air
Trade talks will also be in the spotlight with officials from the U.S., Canada and Mexico set to resume talks on the North American Free Trade Agreement in Washington.

According to a Reuters report, the Labor Department is showing the U.S. economy added fewer than expected jobs in April while wages barely rose. However, the report did little to alter the view that the Fed will continue to hike rates this year.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, rose to 92.75, the most since December 27 before pulling back to 92.42 late Friday. The index posted a weekly gain of 1.17%.

A rising dollar tends to pressure commodity prices, which are denominated in the U.S. currency and become more expensive to holders of other currencies when the dollar appreciates.

The dollar has risen as investors bet that the Fed will continue raising rates while other central banks, including the European Central Bank and the Bank of England typically act more slowly.

As Andrew Hecht of Seeking Alpha points out, commodities are paying a lot of attention to the price action in the dollar these days. “Last week, we saw prices move to the downside in response to the dollar’s recovery. Over coming weeks, a continuation of the current appreciation in the greenback could lead to further selling in the commodities asset class. Any dips in raw materials prices could present an ideal opportunity to pick up some bargains.”

All Eyes on Iran
Investors are getting ready for President Trump’s big decision today on the Iran nuclear accord, which will most likely affect everything from U.S. alliances to trade partnerships, commodities and specifically – the oil market. Expectations are high the President will exit the deal, but questions remain on how quickly the administration would “re”-impose sanctions.

Looking Ahead
It is a light week on the economic calendar, but thanks to Investing.com, here is a look at significant events likely to affect the markets.

Tuesday, May 8
Australia is to publish data on retail sales.
China is to report on trade figures.
Fed Chair Jerome Powell is to speak at an event in Zurich, Switzerland.
The UK is to release industry data on house price inflation.

Wednesday, May 9
Canada is to report on building permits.
The U.S. is to release data on producer price inflation.

Thursday, May 10
The Reserve Bank of New Zealand is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision.
China is to release inflation data.
The UK is to produce data on industrial production and trade. Meanwhile, the Bank of England is to announce its latest monetary policy decision and publish what will be a closely watched rate statement.
The U.S. is to release reports on consumer price inflation and initial jobless claims.

Friday, May 11
Canada is to publish its monthly employment report.
ECB President Mario Draghi is to speak at an event in Florence.
The U.S. is to round up the week with preliminary data on consumer sentiment.

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Jim Williams

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