Copper prices hovered near eight-month highs as expectations of stronger demand from top consumer China were boosted by better than expected economic data and optimism for a US-China trade agreement.
Benchmark copper on the London Metal Exchange ended little changed at $US 6,273 a tonne on Friday. Prices of the metal used as a gauge of economic health touched $US 6,343 on Thursday, its highest since May 1 and a gain of more than 10 per cent since October.
“Signs that the Chinese economy is stabilising were confirmed by pretty robust hard data,” said Commerzbank analyst Daniel Briesemann. “Hopes for a trade deal have helped drive up copper prices recently.”
December’s industrial output in China rose 6.9 per cent from a year earlier, the strongest growth in nine months and above an expected 5.9 per cent, while retail sales climbed 8 per cent.
Fixed-asset investment rose 5.4 per cent for the full year, but growth had plumbed record lows in the autumn.
“The economy had lots of government support last year,” said Argonaut Securities analyst Helen Lau, adding that there is increasing concern over bad debt.
China’s economic growth slowed to its weakest in nearly 30 years in 2019 but was in line with expectations, though the economy ended the year on a firmer note as trade tensions eased.
China will boost purchases of US goods and services by $US 200 billion over two years in exchange for the rolling back of some tariffs under an initial trade deal signed by the world’s two largest economies, defusing an 18-month row that has hit global growth.
“There has been a muted response in commodities markets to the signing of the Phase 1 trade deal between the US and China, perhaps because the good news was already priced in,” Capital Economics said in a note.
TECHNICALS: Strong upside resistance comes in at $6,350, a Fibonacci retracement level. Support is at $6,210, where the 21-day moving average and trendline support currently sit.
SPREAD: The premium for cash zinc over the three-month contract – at about $20 a tonne – is the highest since late November and compares with a discount in mid-December.
A premium has been restored because of worries about low stocks in LME-registered warehouses , close to 20-year lows around 50,000 tonnes, and one company holding large amounts of zinc <0#LME-WHC> warrants and cash contracts.
Three-month zinc closed up 0.3 per cent at $US 2,429.5 a tonne from an earlier $US 2,433, matching the high on November 14.
OTHER METALS: Aluminium slipped 0.4 per cent at $US 1,805, lead fell 1.3 per cent to $US 1,976, tin gained 0.7 per cent to $US 17,810 and nickel added 1 per cent at $US 13,910.