Copper prices rose towards eight-month highs overnight as demand expectations were boosted by economic measures in China and optimism that the world’s top metals consumer would also sign a preliminary trade deal with the United States.
Benchmark copper on the London Metal Exchange closed 0.2 per cent up on Thursday at $US6,188 a tonne.
The metal used widely in the power and construction industries earlier touched $US6,233, close to the $US6,266.50 eight-month peak hit last week.
“It’s not a boom, but the de-escalation of trade tensions, the gradual recovery in manufacturing and Chinese monetary policy loosening mean a benign environment for base metals,” said Danske Bank analyst Jens Pederson.
The People’s Bank of China cut the amount of cash that banks must hold as reserves, releasing about 800 billion yuan ($US114.91 billion) in funds to shore up the slowing economy.
“With the background of a trade war – even if a Phase 1 deal is signed – and an emerging technology war, China’s corporates need more financing support,” ING analysts said in a note, adding that the central bank could cut the reserve requirement ratio by a further 0.5 percentage points in the second quarter.
US President Donald Trump this week said that Phase 1 of a trade deal with China would be signed at the White House on January 15, though considerable confusion remains over details of the agreement.
Chinese factory activity expanded at a slower pace in December, pulling back from a three-year high in November as new orders softened, a survey showed.
However, production grew at a solid rate and business confidence jumped on the thawing trade tensions, offering some support for the cooling economy.
“Looking ahead, we think that exports will continue to benefit from recovering global demand and, at the margin, US tariffs rollbacks. But domestic demand will probably cool further,” Capital Economics analysts said in a note.
Copper faces stiff resistance at $US6,245, where the 100-week moving average currently sits, while support comes in at the 21-day moving average of $US6,110.
Supporting copper prices are falling stocks in LME-registered warehouses.
At 144,675 tonnes, stocks are less than half the levels of August last year and at their lowest since March.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange – at about 124,000 tonnes – have more than halved since March.
Aluminium was down 0.3 per cent at $US1,804.5 a tonne, zinc rose 1.7 per cent to $US2,310, lead eased 0.4 per cent to $US1,919, tin was flat at $US17,175 and nickel gained 1.7 per cent to $US14,260.