(Bloomberg) -- Copper edged higher, erasing earlier losses as a fresh batch of weak data in China sparked calls for policymakers to step up support for the economy.
Industrial output in the world’s biggest commodities buyer in August expanded at a slower rate than economists had forecast, extending a cooling streak to a fourth month, data over the weekend showed. Measures of consumption and investment all slowed more than expected, while the jobless rate surprisingly rose to a six-month high.
Copper initially dropped as much 1%, before rebounding to trade above $9,300 a ton by late morning in London, with the holiday closure of Chinese markets contributing to choppy trading conditions. A gauge of Chinese stocks listed in Hong Kong also swung to a gain as investors debated whether weaker macro data will prompt the government to bolster stimulus.
“China’s August activity data sound a loud alarm about deepening weakness in the economy,” according to Bloomberg Economics. “The weak data make it crystal clear that more policy support is needed. The key is to speed up fiscal spending and boost confidence.”
Currency markets also lent support to industrial metals on Monday, with the Bloomberg Dollar Spot Index hitting its lowest since January as investors across markets ramped up bets that the US Federal Reserve will make a large cut to interest rates later this week. A weaker dollar typically provides a tailwind for commodities priced in the currency by boosting buying power for importers in countries like China.
At a fundamental level, recent draw-downs in domestic copper inventories in China have raised hopes that the worst of this year’s downturn could be over. But the disappointing weekend data is fueling fresh concerns over the longer-term outlook for consumption.
China’s central bank signaled late Friday it would step up its fight against deflation and prepare more policies to revive the economy, after credit data showed private confidence remained weak.
Copper rose 0.4% to $9,346.50 a ton on the London Metal Exchange as of 12:33 p.m. local time. Zinc and lead advanced, also reversing earlier losses, while aluminum rose 2.3%. Chinese markets will remain closed on Tuesday.
©2024 Bloomberg L.P.
