MELBOURNE, Jan 29: London Metal Exchange contracts soured on Thursday after the Federal Reserve signalled it would stick to plans for a rate hike this year, a move expected to reduce market liquidity that has underpinned metals.
News that top metals consumer China plans to cut its economic growth target to the lowest in 11 years at around 7 percent in 2015 also tainted sentiment. ‘Copper is drifting around looking for direction, but bias is to the downside in Asia, particularly from investors in this region,’ said analyst Daniel Hynes of ANZ in Sydney. ‘The Asian market certainly sees weaker demand particularly through the first half of the year and is selling any of the rallies we see come through from European markets, which have been buoyed somewhat by the European Central Bank action.’
Three-month copper on the London Metal Exchange slipped 1 percent to $5,431 a tonne by 0311 GMT, quashing an advance from the previous session and lingering near Monday’s 5-1/2-year low of $5,339.50 a tonne. The Federal Reserve on Wednesday said the U.S. economy was expanding ‘at a solid pace’ with strong job gains, in a signal that the central bank remains committed to its plans to raise interest rates this year.
The most-traded April copper contract on the Shanghai Futures Exchange fell by 0.4 percent to 39,520 yuan ($6,299) a tonne, having pared earlier losses of near 1 percent. In a signal of dwindling demand for physical metal in China that could undermine LME prices, physical copper in the local market was trading at a discount to the front month ShFE futures contract on Wednesday. China is rolling out a series of measures to aid overseas expansion by firms across industries, especially nuclear power and railways, the cabinet said on Wednesday. LME nickel, which has held up better than other LME contracts on prospects of an ore shortage, fell more than 1 percent.
‘While premiums for nickel in China are still increasing, there is still ample refined nickel available elsewhere in the world which will need to be eroded before the price can manage a … sustained rally,’ said broker Triland in a note. China’s bonded nickel premiums have traded at $105 over the past week, after climbing fourfold from $25 at the start of the year. LME nickel stocks are a tad under record highs hit earlier this week above 420,000 tonnes. (agencies)
Follow our WhatsApp channel