Tuesday, June 6

Copper rebounds on optimism over US debt talks

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LONDON — Copper prices rebounded on Friday on hopes that US politicians will seal a deal to avert a debt default and as investors adjusted positions ahead of the weekend.

Three-month copper on the London Metal Exchange (LME) gained 1.2% to $8,273 a tonne by 1050 GMT after sliding 1.6% in the previous session.

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Wider financial markets marched higher after Democratic negotiators told President Joe Biden on Friday that they are making “steady progress” in talks with Republicans in an effort to avoid a US default.

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“We’ve seen this so many times; both sides of the aisle show some brinkmanship, but then come together for a deal,” said WisdomTree commodity strategist Nitesh Shah.

“A lot of cyclical assets are moving one day up, one day down, dependent on what’s going on with the debt situation. Markets are nervous, there’s a high risk of an accident.”

A slightly weaker dollar index also supported the market, making commodities priced in the US currency cheaper for buyers using other currencies.

Also boosting the market were some speculators closing out short-term bearish positions ahead of the weekend, one trader said.

The copper market, however, faces headwinds in the coming weeks, with weak demand in China and potential recession in the United States and Europe, analysts said.

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“Along with weak Chinese demand, a strong US dollar on the back of robust US economic data and hawkish comments from the Fed have placed a cap on copper and commodity prices in general,” said Sabrin Chowdhury, head of commodities at BMI.

The industrial metal used as a gauge of economic health is down nearly 15% from January highs.

The outlook for industrial metals remains weak in 2023, Chowdhury said, highlighting that the China recovery is largely being led by services rather than the manufacturing and construction sectors that have historically driven economic growth in the country.

In other metals, LME aluminum rose 0.4% to $2,293.50 a tonne, nickel jumped 3.9% to $21,740, zinc gained 1.6% to $2,499, lead was up 1.6% at $2,088 and tin climbed 1.3% to $25,350. ( Reporting by Eric Onstad Additional reporting by Swati Verma in Bengaluru Editing by David Goodman)


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