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Planting the Seed for Better Copper Prices?

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Planting the Seed for Better Copper Prices?

The price of copper dropped in overnight trading after weak Chinese trade data disappointed investors, although metals traded in London drew some support from President Donald Trump’s comments about the trade war with China.

Yesterday President Trump was in New Orleans at the American Farm Bureau Federation’s annual convention. The President defended his tough trade policies in front of thousands of farmers who have been severely impacted by the tit-for-tat battle with China. President Trump said his trade policies would deliver long-term benefits for the American heartland.

“With China, every year for many years we’re losing $375 billion. We’re working on that very strong. You see what’s going on. Doing very well,” Trump said at the convention, without providing specific details on the negotiations.

The stare down with China has been the focal point for trading for months. One day it looks promising. The next, not so much.

“Headwinds to manufacturing sentiment have been broad-based, showing in both China, but also the U.S., where many market participants have been concerned over the ongoing trade dispute,” Bank of America Merrill Lynch strategists said in a note.

Analysts point to a recent string of weak Chinese data that could increase the likelihood of Chinese government stimulus, and that could slow the recent fall in copper prices. Some think a U.S. – China trade compromise could also improve global growth sentiment.

Including frequent tED contributor Andrew Hecht of Seeking Alpha. “When it comes to the copper market, a long position in the red metal could be a proxy for a settlement of the trade dispute between the U.S. and China,” states Hecht. “A trade deal would likely cause optimism to return to the stock market and would set the stage for an economic rebound in China which translates to more demand for copper.”

Copper Price Check

Copper had a good week last week, finishing up 1.57%. Long term, the news has not been as positive. Copper on the London Metals Exchange has fallen to $5,926 a ton, down 28% since the June 2018 peak of $7,250 and 4% down since the first of October. The red metal opened for trading this morning at $2.64 a pound. Click on the chart below for up-to-the-minute pricing.

The Week Ahead

This week investors will continue to monitor movements in the U.S. dollar, one of the ‘other’ biggest factors for copper, with the greenback in turn taking its cue from expectations around the Federal Reserve’s monetary policy plans.

Today’s data on U.S. producer price inflation will be closely watched and if figures indicate that inflationary pressures are cooling, there could be a further reprieve from concerns over the prospect of additional rate hikes in the coming months.

Fed Chairman Jerome Powell said on Thursday the U.S. central bank could be patient on rate policy.

A number of Fed officials are scheduled to speak this week, where they are expected to reassure market watchers the Fed will take a patient approach towards monetary policy.

Here is a look at significant events likely to affect the markets as compiled by Investing.com.

Monday, January 14

Financial markets in Japan were closed for a holiday.

China released data on trade and direct foreign investment.

New Zealand released a report on business confidence.

Tuesday, January 15

In the UK, parliament members are due to hold a second attempt to vote on Prime Minister Theresa May’s Brexit deal.

European Central Bank President Mario Draghi is due to speak at an event in Strasbourg.

The U.S. is to release figures on producer price inflation and the Empire manufacturing index is also on tap.

Kansas City Fed President Esther George is to speak.

Wednesday, January 16

Australia is to release data on consumer sentiment.

Bank of England Governor Mark Carney is due to testify, along with other policymakers, on the Financial Stability Report before the Treasury Select Committee.

The UK is to release producer price inflation data.

Thursday, January 17

Central bankers and finance ministers from the G20 nations are to hold a summit meeting in Tokyo.

Bank of Japan Governor Haruhiko Kuroda is due to speak at the G20 summit.

The euro zone is to publish revised inflation figures.

The U.S. is to publish the weekly report on initial jobless claims as well as the Philly Fed manufacturing index.

Fed Governor Randal Quarles is to speak.

Friday, January 18

The G20 summit is to continue for a second day.

The UK is to release data on retail sales.

Canada is to release inflation figures.

New York Fed President John Williams is to speak.

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

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