Copper eyes to snap six-week downtrend on China-linked demand

• Copper braces for first weekly gain in seven on LME, eyes to snap four-week downtrend on COMEX.
• PBOC cuts five-year LPR, China marks further reduction in covid numbers.
• Market sentiment turns out mixed despite softer yields, firmer stock futures.

Copper futures on COMEX remain on the front foot at around $4.288, up for the second consecutive day heading into Friday’s European session. In doing so, the metal prices print the first weekly gain in five.

It’s worth noting that the benchmark three-month contract on the London Metal Exchange (LME) drops 0.4% at $9,377.50 a tonne, as of 02:03 GMT, after rising 2% in the previous session. Even so, the contract is up 2.4% so far this week, per Reuters. With this, the LME Copper snaps a six-week downtrend.

The industrial metal’s recent strength could be linked to the positive developments surrounding China, the world’s biggest industrial player. The People’s Bank of China (PBOC) lowered the five-year Loan Prime Rate (LPR) by 15 basis points (bps) to 4.45% but kept the one-year LPR unchanged at 3.70% in its latest moves. The PBOC left 1-year Medium-Term Lending Facility (MLF) interest rate unchanged at 2.85% earlier in the week.

On the other hand, China reports a sustained fall in the covid numbers and the virus-led deaths while justifying the recently eased activity restrictions in Shanghai, as well as in Mainland. “China reports 193 new confirmed coronavirus cases in the mainland on May 19 vs 212 a day earlier,” said Reuters. The news also mentioned no new coronavirus deaths on May 19 versus 1 a day earlier.

Even so, Citibank Sees LME Copper falling to $8,500 per tonne on a 0-3 month view per Reuters.

The bank might have traced the recent headlines from the International Monetary Fund (IMF) and Reuters polls suggesting further fears for Asia.  IMF Deputy Managing Director Kenji Okamura followed Managing Director Kristalina Georgieva’s signal for tighter monetary policy ahead. IMF’s Okamura said, “Asian economies must be mindful of spillover risks as a decade of unconventional easing policies by major central banks is withdrawn faster than expected.”

“The US Federal Reserve will lift interest rates higher by the end of this year than anticipated just a month ago, keeping alive already-significant risks of a recession,” said the latest Reuters poll of economists.

Looking forward, copper prices may take clues from China, as well as risk catalysts amid a light calendar.