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METALS-Copper rebounds on hopes for slower U.S. rate hikes, China stimulus

METALS-Copper rebounds on hopes for slower U.S. rate hikes, China stimulus

Reuters · 07/28/2022 06:55
METALS-Copper rebounds on hopes for slower U.S. rate hikes, China stimulus

Updates throughout, changes dateline from BEIJING

- Copper prices rose to a three-week high on Thursday as investors anticipated slower U.S. interest rate rises and improved demand from top consumer China.

The Fed delivered another 0.75% rate increase on Wednesday, but comments by Chairman Jerome Powell led to hopes of smaller increases in the future.

Investors responded by embracing riskier assets. World shares reached a 6-week high and the dollar weakened, helping dollar-priced metals by making them cheaper for buyers with other currencies. MKTS/GLOB =USD

Benchmark copper CMCU3 on the London Metal Exchange was up 1.1% at $7,722 a tonne at 1022 GMT.

Prices of the metal used in power and construction are up 11% from a 20-month low of $6,955 on July 15, but down 20% this year.

"The pain from rate increases is likely to be greater than in the future," said WisdomTree analyst Nitesh Shah. "If signs of recession are picked up by the Fed, at some point they'll go into easing mode."

Higher interest rates restrain economic growth and demand for metals.

The short-term economic outlook remains grim. Euro zone economic sentiment deteriorated sharply and Asian manufacturers warned of a sharp slowdown in demand for smartphones, TVs and gadgets.

But Shah said copper supply would be tight and demand in China, which has been weak, was improving thanks to stimulus and easing COVID-19 restrictions.

The Financial Times reported that China will issue 1 trillion yuan ($148.2 billion) in loans for stalled property developments.

Investors also hope a meeting of China's Politburo in the coming days will release more spending on metals-intensive infrastructure.

"More stimulus will help bolster market confidence," said CRU analyst He Tainyu. "But pressure is here to stay if China's exports and property markets remain weak in the longer run."

LME aluminium CMAL3 was up 1.3% at $2,455 a tonne, zinc CMZN3 rose 2.8% to $3,139 and lead CMPB3 gained 0.3% to $2,018. Nickel CMNI3 fell 0.6% to $21,675 a tonne and tin CMPB3 was down 0.2% at $24,305.

(Reporting by Peter Hobson; Additional reporting by Siyi Liu and Emily Chow; Editing by Shounak Dasgupta)


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