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Copper Takes a Ride With Tariff Talks

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Copper Takes a Ride With Tariff Talks

Copper soared Friday on optimistic comments from the United States and China about a potential trade deal. Copper broke the $2.80 level and finished the week up 2.41%. Those prices slipped yesterday as doubts surfaced over the potential for a trade deal.

The red metal opened this morning at $2.7560 on the Comex division of the New York Mercantile Exchange. Click on the chart below for the latest prices.

Yesterday, Chinese President Xi Jinping promised to lower tariffs, broaden market access and import more from overseas. Also on Monday, President Donald Trump said that China has hurt the United States economically but was ready to make a deal on trade and he is open to a fair agreement.

Doubts, and a lower price of copper, arose later in the day after White House economic adviser Larry Kudlow said he was less optimistic than he was previously about reaching a deal with China.

“(President Xi’s) reiteration of plans to further cut taxes, import $30 trillion of goods over the next 15 years, coupled with a distinct lack of details around any further stimulus measures, leaves the market disappointed,” Marex Spectron analyst Alastair Munro said in a note.

The focus now shifts to the mid-term elections and the Federal Reserve’s November meeting as markets continue to digest Friday’s strong U.S. jobs report.

Voters are expected to flood the polls today to decide key races in Congress and state governments.

“The outcome of the midterm elections…could cause volatility in markets across all asset classes,” says frequent tED contributor Andrew Hecht of Seeking Alpha. “It is possible that we will see increased volatility in the commodities asset class following the elections. A continuation of the status quo leading to economic growth could increase inflationary pressures and the demand for raw materials. Gridlock could have the opposite effect on the economy.

“Commodities tend to be the most volatile of all, so fasten your seatbelts for what could be a wild ride,” concludes Hecht.

Interest Rate Status Quo for Now?

The Fed starts its two-day meeting tomorrow, with markets anticipating no change to interest rates yet – expectations are the Fed will hike the rate in December.

U.S. job growth rebounded sharply last month and wage growth accelerated at the fastest pace in more than nine years, indicating the labor market is continuing to tighten and underlining the case for the Fed to hike interest rates again in December.

The Dollar Suffers A Halloween Hangover

The dollar hit a 16-month high last Wednesday and then suffered consecutive negative days to open the month of November. A stronger dollar usually makes dollar-denominated assets, like copper, more expensive to potential buyers holding other currencies. Interest rate increases and higher U.S. bond yields typically tend to push the dollar higher – and copper lower.

We will keep an eye on the election, the Fed meeting and the dollar and report any impact they might have on the price of copper.

The Markets Must Go On

There are many other things happening beyond tariff talks, the mid-term election and the Fed meeting. Investing.com has compiled a list of these and other significant events likely to affect the markets this week.

Monday, November 5

The UK released data on service sector activity.

Bank of Canada Governor Stephen Poloz spoke at an event in London.

The Institute of Supply Management published data on non-manufacturing activity.

Tuesday, November 6

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 U.S. mid-term elections are today.

New Zealand is to release its latest employment report as well as data on inflation expectations.

Wednesday, November 7

The euro zone is to report retail sales figures, while Germany is to produce data on industrial production.

The Reserve Bank of New Zealand is to announce its latest monetary policy decision and hold a press conference.

Thursday, November 8

China is to release trade data.

The U.S. is to publish the weekly report on initial jobless claims.

Later in the day, the Fed is to announce its latest monetary policy decision and publish its rate statement.

Friday, November 9

The UK is to release data on GDP growth and manufacturing production.

The U.S. is to publish figures on producer price inflation and consumer sentiment.

Fed Governor Randal Quarles is to speak at an event in Washington.

 

Further Reading

Shipping and Commodities by Andrew Hecht of Seeking Alpha

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Jim Williams

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