miércoles, 22 de octubre de 2014

miércoles, octubre 22, 2014

Commodities

Chinese Stimulus Fuels Hope for Copper Prices

Industrial Metal Rebounds From a Six-Month Low

By  Tatyana Shumsky



     China is the world’s top copper consumer by volume. Bloomberg News        


Copper prices clung to $3 a pound last week as encouragement over stimulus efforts by China offset worries about slowing global growth.

The People’s Bank of China told financial executives last week that it plans to extend as much as 200 billion yuan ($32.8 billion) in short-term loans to 20 large banks, with the goal of spurring lending activity and boosting growth. The move comes on the heels of a cut to short-term borrowing rates for Chinese banks on Oct. 14, the second such reduction in less than a month.

Investors are hoping China’s efforts will lead to greater demand for copper, as a stronger economy would boost purchases of homes and manufactured goods that use the industrial metal. Copper for December delivery, the most actively traded contract, rebounded from a six-month low to end 2.2 cents, or 0.7%, higher at $3.0035 a pound Friday on the Comex division of the New York Mercantile Exchange.

Still, few market watchers expect copper’s gains to hold.

“The market always wants to see China buying…[but] there isn’t a belief that this is going to turn into more industrial production,” said John Payne, senior market analyst with Daniels Trading in Chicago.

As the world’s top copper consumer by volume, China has kept the market under siege throughout 2014. A slowdown in manufacturing and construction, as well as slower overall economic expansion, has led to weaker global prices for the metal.

Unlike Beijing’s past stimulus efforts, which focused on large infrastructure projects such as public housing and roads, the latest measures are purely monetary and rely on the business sector to seek more credit. This might not lead to an increase in loans and business activity because sentiment about China’s economic outlook remains subdued, Mr. Payne said.

China needs to grow about 8% a year to maintain commodity rallies, and it hasn’t grown at that pace in more than two years, Mr. Payne said. Chinese authorities are aiming for 7.5% growth this year.

Moreover, the fact that China’s central bank stepped in to boost growth for a second month in a row is itself a signal that the economy is under stress, said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago. “The threat of unrest in China is real if the economy slows down too much,” he said.

On top of the uncertainty about China, copper traders are facing the prospect of reduced metal consumption in the U.S. and Europe. Recent data showed factory-gate prices in the U.S. fell last month, while retail sales were weaker than expected. In Europe, industrial output slowed 1.8% in August from a month earlier.

“The landscape for demand for copper still looks quite weak as the majority of the globe is slowing down, China included,” said James Cordier, president of Liberty Trading Group in Tampa, Fla.

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