By Jim Williams
If you didn’t know better, you may have thought the future of copper was doomed last week based on reports out of China. The prices hit a six-month low. Economic reform was not working. Copper imports were bleak. Basically, the sky was falling and it was all China’s fault.
Well, fast-forward to this week and the reports are not so grim. They aren’t setting records, but the red metal did inch a little higher to start the week thanks to a firmer Chinese stock market and data showing the country’s imports of copper stabilized in June.
After a month-long rollercoaster ride, China’s stock market is showing some signs of stabilizing, suggesting Beijing’s bundle of support efforts are having the intended impact. Last week, Chinese officials allowed more than half of all listed companies to suspend their shares from trading and prohibited major stakeholders from selling at all, pushing the Shanghai market up 13%.
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China is the world’s top copper consumer, accounting for about 40% of global demand, and investors worried that troubles in the stock market could hamper broader economic activity. Copper is widely used in manufacturing and construction and is a core input into everyday goods like electrical wire, phones, computers and cars.
On Monday, copper saw its third straight day of gains. The increase came as 355 stocks resumed trading after the above-mentioned lockdown by authorities.
“The rebound in Chinese equities is certainly helping the situation,” Dave Meger, director of metals trading at High Ridge Futures in Chicago told Nasdaq.com. “The stock rally is helping to re-establish investor confidence in China and the government’s ability to keep its economy on course toward its target growth,” Meger added.
China’s imports of copper and copper products remained unchanged from a year earlier, according to the General Administration of Customs. Still, imports for the first six months of the year were down 11 percent from the same period of 2014, reflecting this year’s slowdown in China’s demand for the industrial metal.
“Imports could improve in (the second half) as China’s economy seems to be stabilizing and strong government infrastructure programs continue,” analysts at Barclays said in a note to clients.
It remains to be seen what direction the market will take now. Can more support be on the way? Or will the rollercoaster ride continue?
Experts expect copper prices to trade lower today as Greece’s Prime Minister faces a showdown with rebels in his own party who are furious at his capitulation to German demands for one of the strictest packages ever demanded of a euro zone government.
Investors are also keeping an eye on the market ahead of key retail sales data from the U.S. that could act as a negative factor. Plus, the nation’s largest banks report their second-quarter results this week, starting with JPMorgan and Wells Fargo on Tuesday.
ollowed by Bank of America and Goldman Sachs later in the week, along with private equity firm Blackstone and asset manager BlackRock. Despite the stable economy in the U.S., analysts are predicting relatively ho-hum results.
As always, we will keep an eye on copper and report to you here.
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