Copper retreats from two-week top amid US dollar rebound, China growth fears

• Copper pares gains after refreshing 13-day high as risk-aversion, concerns over top consumer China recall sellers.
• Hawkish Fedspeak, cautious mood ahead of the key data/events weigh on market sentiment.
• Extended lockdowns, geopolitical headlines raise concerns over China’s economic growth.

Copper prices on COMEX futures bear the burden of risk-aversion, as well as clouds over China demand, retreating from over a two-week high to $4.30 heading into Tuesday’s European session.

Elsewhere, the benchmark three-month copper on the London Metal Exchange (LME) was down 0.4% at $9,510.50 a tonne, as of 02:17 GMT per Reuters, after hitting its highest since May 5 at $9,565 on Monday. Further, the most-active June copper contract on the Shanghai Futures Exchange (SFE) rose 0.2% to 72,150 yuan ($10,827.48) a tonne, per the news.

The recently hawkish comments favoring the tighter monetary policy from San Francisco Federal Reserve Bank President Mary Daly and Kansas City Fed President Esther George seem to exert downside pressure on the market sentiment. Furthermore, anxiety ahead of the preliminary readings of the US S&P Global Manufacturing and Services PMIs for May, as well as a speech from Fed Chairman Jerome Powell, also weigh on the risk appetite.

On the same line was US Trade Representative (USTR) Katherine Tai who poured cold water on the face of expectations that the Sino-American jitters will be eased soon, at least for the trade concerns. The US diplomat said, “We're still working on next actions with China,” while turning down the optimism triggered by US President Joe Biden’s comments suggesting a reversal of the Trump-era tariffs on China.

It’s worth noting that Reuters highlights the covid-led lockdowns in China as the key barrier to copper’s latest weakness. “Beijing extended its work-from-home requirement to stem a COVID-19 outbreak, while Shanghai deployed more testing and curbs to hold on to its hard-won "zero COVID" status after two months of lockdown,” said the news.

Additionally challenging the outlook for China were the recently pessimistic growth forecasts from JP Morgan and Goldman Sachs.

While risk catalysts and concerns over China’s economic growth keep copper prices depressed, the dragon nation’s readiness to introduce more measures to overcome the pandemic-led economic hardships keeps the metal buyers hopeful. “China will broaden its tax credit rebates, postpone social security payments and loan repayments, roll out new investment projects and take other steps to support the economy, state television quoted the cabinet as saying on Monday,” said Reuters.

To sum up, copper prices should improve gradually but the latest risk-aversion may hinder the recovery moves.