LIVE FUTURES REPORT 04/06: Weak dollar, positive fundamentals push SHFE copper up by 0.4%
Copper outperformed its peers on the Shanghai Futures Exchange with an uptick of 0.4% during morning trading on Tuesday June 4, with a sharp fall in the dollar overnight providing support to the red metal.
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But lingering concerns over global trade disputes, that continue to weigh on overall market sentiment, are capping any meaningful gains in copper prices and are keeping the rest of the complex under downward pressure this morning.
The red metal’s most-traded July contract climbed to 46,320 yuan ($6,707) per tonne as at 09:27 am Shanghai time, up by 190 yuan per tonne from Monday’s close of 46,130 yuan per tonne.
The dollar index, which gauges the strength of the US dollar against a basket of foreign currencies, fell sharply overnight to 97.20 as at 9.27am Shanghai time, the lowest level since mid-May, following dovish comments from US Federal Open Market Committee (FOMC) member James Bullard.
“A massive rates rally across the curve occurred on Monday as rate cut bets grew following both very dovish comments from the St Louis Fed Chief Bullard and concerns that global trade wars will continue to worsen. The dollar fell against all its major trading partners after rate cut expectations surged for the Fed to cut rates at the July FOMC meeting,” Edward Moya, senior market analyst at Oanda, said in a morning note.
Meanwhile, China’s stronger-than-expected Caixin manufacturing purchasing managers’ index (PMI) for May, at 50.2, was flat with the prior month’s reading but beat the forecast reading of 50. This, to some degree, is buoying copper prices, according to an analyst with Chinese broker Guotai Jun’an.
Furthermore, a decline in on-exchange copper inventories is also providing support to red metal prices.
In the refined market, global exchange inventories (London Metal Exchange, SHFE, Comex) dropped by around 77,000 tonnes or 16% last month, according to Fastmarkets MB research analyst Boris Mikanikrezai.
In other supply news, employees at the Chuquicamata division of Chilean copper miner Codelco have continued to work while trying to secure a deal with the company, despite having voted for industrial action. The development is partially offsetting the positive backdrop for copper.