Shanghai copper down, but supported by hope of China easing
Tuesday, 10 April 2012 | 00:00
Shanghai copper slipped on Monday, under pressure from a rising rate of inflation in China,but losses were limited on hopes that the world's biggest user top will go ahead with further monetary policy easing.
Data showed China's annual consumer inflation rose a faster-than-expected 3.6 percent in March, with volatile food prices leading the increase.
The most-active July copper contract on the Shanghai Futures Exchange slipped 0.8 percent to close the session at 59,840 yuan ($9,500) per tonne.
"Hopes for more monetary easing and stimulus by Beijing are helping to support Shanghai copper even though the macroeconomic outlook and its own demand fundamentals are bearish," said Antaike analyst Yang Changhua.
The modest losses in copper and other Shanghai-traded base metals also reflected indecision among market participants in the absence of trading cues from London, where markets will stay shut for Easter Monday.
"Yes, the Chinese economy is cooling but not drastically, and it can all turn around if this leads to more credit loosening in China," said a Qingdao-based copper trader.
Economists expect the raft of other economic data due this week, including first-quarter gross domestic product and trade balance, to reinforce the view that Beijing has room to loosen credit further and support economic growth, which will boost China's raw material demand in the long run.
The view that a cooling economy has eclipsed inflation as Beijing's biggest near-term worry was further reinforced by surprisingly soft producer prices, which dropped 0.3 percent from a year ago in March, sparking concerns that it indicated weakening demand.
Traders will also keep a keen eye on China's preliminary trade data for March, which is expected to show imports of copper falling from February's volume of 484,569 tonnes, as swollen stockpiles at ports, and uncompetitive prices, make shippers cautious.
Trade data is due to be released on Tuesday.
Outside China, traders will be looking to U.S. Federal Reserve Chairman Ben Bernanke's speech, due at at 2315 GMT on Monday, when he is likely to address the disappointing U.S. jobs data.
U.S. nonfarm payrolls grew 120,000 last month, well below the 203,000 the market had expected, data showed on Friday, keeping the door open for the Fed to provide more monetary support for a still fragile economy.
"All will be well if (Bernanke) mentions QE3. If he doesn't even mention it, the markets may be in for another dive," said the copper trader said.
Benchmark London copper fell more than 3 percent last Wednesday, its biggest single-day slide in nearly two months, after minutes from the Fed's latest meeting dashed hopes for a third round of monetary stimulus, also called QE3.