Copper trades mixed as market deficit contrasts hawkish Fed signals, China’s covid woes

• Copper price struggles to cheer pullback in DXY amid fears of higher rates, less demand.
• China reports strong coronavirus numbers, Fed’s Powell turns down hopes of slower rate hikes.
• The world refined copper market reported 16,000 tonnes of deficit in August.

Copper price remains directionless while struggling around the weekly lows during early Thursday. That said, the demand-supply matrix and softer US dollar favor the metal buyers but fears of higher rates and lesser demand from China, the world’s biggest metal buyer, seem to challenge the commodity prices.

While portraying the mood of the red metal traders, the copper price on the COMEX appeared mildly bid near $3.4480 while Reuters stated a three-month contract on the London Metal Exchange (LME) as having the quote of $7,621, down 0.10%, around 05:21 GMT.

“The world's refined copper market showed a 16,000-tonne deficit in August, compared with 80,000 tonnes in July, the International Copper Study Group said,” mentioned Reuters. The news also quotes ICSG as saying that for the first eight months of the year, the market was in a 292,000-tonne deficit compared with a 152,000-tonne deficit in the same period a year earlier, the ICSG said.

Elsewhere, the lockdown surrounding the area involving the world’s largest iPhone factory defied hopes of easing China’s zero-covid policy. Further, Reuters quotes China’s latest National Health Commission figures to suggest an uptick in coronavirus cases. The news states, “China reported 3,372 new COVID-19 infections on Nov. 2, of which 581 were symptomatic and 2,791 were asymptomatic.”

It should be noted that the outlook for the industrial metal also deteriorated due to the previous day’s Fed action. Fed’s 75 bps increase in the benchmark rate initially triggered the market’s optimism as the rate statement highlighted the odds of a slower rate hike. The update stated, “Cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”  However, Powell’s speech triggered the risk-aversion wave as he cited the need to bring down inflation “decisively” while also suggesting a bit longer play for the restrictive policy.

Moving on, copper prices are likely to grind lower amid broad economic fears and an anticipated increase in the US dollar. However, today’s US ISM Services PMI for October, forecasted to ease to 55.5 in October compared to 56.7 in previous readings, will precede Friday’s jobs report to direct short-term moves.