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Could a Trade Deal Push Copper to New Highs?

Could a Trade Deal Push Copper to New Highs?

Now that deals have been signed, or expected to be signed soon, with the European Union, Mexico, Canada, South Korea, and other trading partners around the world, the focus now turns squarely on the trade standoff between the United States and China.

If the staredown between the two biggest countries in the world continues, the aftermath could leave a major scar on the global economy that will be hard to bounce back from any time soon. The founder of Alibaba has said that a trade war between the U.S. and China could last for decades. The International Monetary Fund (IMF) has warned of “darkening clouds” over the trade issue. The IMF recently lowered its global growth forecasts to 3.7% this year, down from its April estimate of 3.9%.

The trade conflict continues to weigh on the price of copper. Frequent tED contributor Andrew Hecht thinks a trade deal could light a fuse under the price of copper. Hecht predicts a deal with China could push the red metal back above the $3 per pound level and to a new and higher high than seen in late 2017.

“I continue to believe that the solution to the current dispute will come from an economic summit between China’s President Xi and U.S. President Trump in the coming weeks or months,” states Hecht of Seeking Alpha. “Both sides continue to position for negotiations, but a compromise is in their best interests, and each leader could claim victory with an agreement.”

In the meantime, the band must go on – the stock market was open yesterday as banks and the bond market were closed for Columbus Day. Investors woke up this morning to business as usual. A stronger U.S. dollar and rising U.S. government bond yields could represent a significant headwind for commodities this week.

With a fairly light week on the economic calendar, we will continue to monitor the effects of rising U.S. government bond yields on markets as they reopen today.

Concerns over Italy’s rising debts and strains in emerging markets will also remain in focus as markets continue to digest Friday’s mixed U.S. non-farm payrolls report.

The Week Ahead

LME Week kicked off yesterday in London. Representatives from the entire supply chain get together every year to discuss current trends in metals markets, what to expect for the year ahead, and to network with industry peers and colleagues.

LME 2018 — Rising end-use demand, declining mine output to support copper in 2019: CRU

You can keep up to date on the meeting by following #LMEWeek on Twitter.

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

Monday, October 8

Financial markets in Japan were closed for a holiday.

Markets in Canada were closed for the Thanksgiving holiday.

In the U.S., the stock market was open, but the bond market was closed for Columbus Day.

Tuesday, October 9

Australia is to release data on business confidence.

Wednesday, October 10

New York Fed President John Williams is to speak at an event in Bali.

The UK is to publish its monthly GDP report, along with data on manufacturing and industrial production.

The U.S. is to release a report on producer price inflation.

Thursday, October 11

The European Central Bank is to publish the minutes of its latest rate-setting meeting.

The U.S. is scheduled to release figures on consumer price inflation along with the weekly report on initial jobless claims.

Friday, October 12

China is to publish its latest trade figures.

The U.S. is to round out the week with preliminary data on consumer sentiment.

Further Reading

China Slowing, Copper Headwinds – Seeking Alpha

ICSG Press Release: Copper Market Forecast 2018/2019

Everyone’s Bullish on Copper

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Jim Williams

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