SINGAPORE, Oct 17: London copper edged back from a two-week high hit earlier on Thursday as Washington sealed a deal to avert a U.S. Debt default, with normal business quickly resuming in a market with steady if slow demand growth and ample supply.
Legislation on the deal passed through both chambers of Congress after Republicans dropped their bid to link the spending measure to changes in President Barack Obama’s healthcare law.
But the bill, which Obama is expected to promptly sign into law, offers only a temporary fix to the government shut down and debt ceiling. It funds the government until Jan. 15 and raises the debt ceiling until Feb. 7.
Markets had shown confidence the U.S. Would cobble together a fix and as such the impact on metals was muted, with attention now returning to demand from top consumer China.
‘Demand generally is better than the same period of last year, but when the winter starts in China, from late November in the north, there’s seasonal impact on demand,’ said analyst Chunlan Li at consultancy CRU in Beijing.
‘Over all we’re expecting a year-on-year increase that is stronger than last year,’ she said, adding that markets should keep an eye on fast rising house prices in major Chinese cities which is fuelling investment demand in real estate.
‘If the government starts putting stricter controls on houses again that could impact demand for copper. But so far we haven’t seen any signs of that.’
Three-month copper on the London Metal Exchange traded at $7,245 by 0157 GMT, down 0.2 percent from the session before when it notched up a small 0.3 percent gain.
Copper prices stretched to $7,300 a tonne earlier on Thursday – their loftiest since Oct. 3. Prices have clawed back more than half the year’s losses, but still remain down by more than 8 percent this year.
The most-traded January copper contract on the Shanghai Futures Exchange erased an early advance of more than 0.6 percent to trade flat at 52,190 yuan ($8,600) a tonne.
Housing demand growth fuels demand for copper, which can be used in consumer and electrical goods once houses are fitted out, but also through financing, where traders import commodities and sell them in the local market to raise cash for higher yielding investments.
The government wants to prevent a bubble from forming and head off unrest if people cannot afford to buy homes. However, it cannot tighten too much as a strong property market has helped offset an economic slowdown.
China’s new home prices rose at the fastest rate in at least 2-1/2 years in August. September figures are due next week, after China’s Q3 GDP figures and industrial production on Friday which should shed more light on growth in the world’s second biggest economy.
(AGENCIES)
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