Copper Price drops back below $3.50 on covid, recession fears

• Copper takes offers to renew intraday low, reverses the previous day’s recovery moves.
• Fears of economic slowdown, doubts over Chinese stimulus join virus woes to weigh on sentiment.
• Pre-NFP anxiety, mixed US data also exert downside pressure on the metal.

Copper Price fades the bounce off the lowest levels since November 2020 as risk-aversion continued to weigh on the red metal prices ahead of the key US jobs report.

That said, a three-month copper on the London Metal Exchange (LME) fell 0.5% to $7,780 a tonne by 0428 GMT while the most-traded August copper contract ended morning trade with 1.2% daily gains at 58,940 yuan ($8,787.83) a tonne on Shanghai Futures Exchange (SFE). Also, the COMEX Futures contract drops 1.5% to $3.48 by the press time of early Friday morning in Europe.

News that China is ready for $220 billion of stimulus with unprecedented bond sales, per Bloomberg, previously propelled the red metal before the doubts over the heavy stimulus joined the covid woes to recall sellers. Reuters mentioned the local government's lack of readiness to push more stimulus, mainly due to a limit at home, to mark the odds of failures of such a huge stimulus from the dragon nation.

Also, National Australia Bank economist Tapas Strickland said, “While Chinese policymakers are considering boosting stimulus, the headwind from COVID-19 restrictions remain given China is still running a zero-COVID policy.” The same joins news suggesting an increase in China’s daily covid numbers, from 409 to 478, to weigh on the metal prices.

Additionally, Reuters also came out with the resumption of copper production by the world’s largest manufacturer and gave more reason to justify the latest downturn in the metal prices. “Chile's state-owned Codelco, the world's largest copper producer, will begin construction on a long-delayed $1 billion desalination plant this year to supply its largest operations in northern Chile,” said the news.

Elsewhere, an inverted curve between the 2-year and 10-year US Treasury bond yields joins central bankers’ aggression towards the higher rates to weigh on Copper Price.

Moving on, updates from China and Chile will join the US jobs report for June to direct immediate moves of the metal. Forecasts suggest the headline US Nonfarm Payrolls (NFP) is expected to post the smallest monthly increase in jobs since April last year, by easing to 268K from 390K for June while the Unemployment Rate is likely to stay unchanged at 3.6% for the said month.