By Jim Williams
Data released by China’s National Bureau of Statistics on Saturday
showed Chinese industrial production hitting a six-year low of 6.9
percent year-on-year; fixed asset investment is down 16.5 percent from a
previous 17 percent while retails sales undercut the expected 12.1
percent at 11.9 percent. The most actively traded contract, for December
delivery, settled 0.7 per cent, or 2.10 cents, lower at $3.0855 a pound
on the Comex division of the New York Mercantile Exchange. This was the
lowest settlement since June 19.
In fact, copper futures fell to their lowest level in nearly three
months on Monday as investors bet that slower economic expansion in
China would weigh on demand for the industrial metal. Monday was the
first chance investors had to react to the news out of China.
“The sharp slowdown of industrial production to a six year low of 6.9
percent year-on-year, in particular, implied that China’s 3Q economic
growth could be at risk of testing the seven percent supporting
line…More softening of Chinese growth indicator, following this
morning’s poor industrial production print, would likely inject further
downside pressures on commodity prices.” commented economists from OCBC
Bank.
Some investors had hoped slower growth would prompt Beijing to launch
a stimulus program to ensure the economy reaches its annual 7.5 per
cent expansion target.
TD Securities says, not so fast. A note to their clients said,
“Recent comments from Premier Li Keqiang suggest that the government
will not be distracted by short-term fluctuations in individual
indicators hence there is little chance of enhanced lending stimulus at
this point.
For the week ahead, all eyes are on the Federal Open Market Committee
(FOMC) meeting for a cue to the end of quantitative easing in the U.S.
The FOMC, the Fed’s policy-deciding body, holds its two-day September
meeting this week (September 16-17), with any announcements due on
Wednesday.
“While we do not expect the Fed rate normalization to take place or
even to be announced this time, we will be looking for any material
shift within its FOMC statement,” said a research note from United
Overseas Bank.
Traders say more downside could be seen this week with copper
pricing. Some even expect the red metal to hit $6,600 before catching a
bounce back. We will keep an eye on the FOMC meetings this week and
report any shift – positive or negative – on the price of copper next
week.