Copper Set for Terrific Week

Daily Analysis - 28/07/2017

Demand in China Boosts Copper Futures


Prices for copper have rebounded from earlier this week to reach a 2-year peak as investors foresee China, the largest purchaser of the industrial metal, could spark a shortage in the global market. Copper futures have surged by more than 5.00% from the start of the week, highlighting further upside potential should momentum persist.

Price Action for Copper Indicates Potential for Further Rally

An impending possible move by China to prohibit imports of scrap metals could be the spark for a rebound in copper prices, which investors anticipate will fuel heavy demand for imports of refined copper. Chinese officials have considered banning scrap metals as early as 2018. Should the new regulation be implemented, the market for refined copper may expand rapidly in an economy that tallies nearly 50.00% of the world’s total consumption of the industrial metal. Copper prices for delivery in August are trending near $2.8550. Trading volumes for the week are at their highest point since November of 2016, a sign that the uptick saw heavy participation from the market and could very well be extended. Closing higher than recent peaks of $2.8995 might lead to further gains. On the other hand, any correction could see copper find support near $2.8200.


Orders for Durable Goods in US Expand

Durable goods orders in the US soared in June to reach three-year peaks as business expenditures on equipment boosted economic growth in the three months ending in June. Non-perishable goods orders expanded 6.50% a month ago, per a report from the Department of Commerce. Market consensus estimates had projections of a 5.30% increase. The airline segment saw the biggest improvement, as Boeing collected nearly 200 new orders for airplanes after the annual Paris air show. Not accounting for autos and jets, the number of new orders expanded by a less impressive 0.20%. In a more disappointing announcement, orders for core capital goods, a central indicator of business spending, declined by -0.10% last month, the first downcast print since the end of 2016. Nasdaq futures were in freefall Friday morning and currently sit near 5860 after leveling out.


Chinese Unemployment Extends Gains

The jobless rate in urban areas in China stayed under 4.00% for the second consecutive trimester as the world’s second largest economy kept a steady growth trajectory for the first six months of 2016. Urban unemployment remained at 3.95% at the end of the month, compared to the 3.97% reported at the end of March, per a report from the Ministry of Human Resources. Year over year, the official reading was last under 4.00% as recently as 2001. China’s economy expanded quicker than anticipated at 6.90% during the second three months of the year on the back of more robust exports, putting China well on pace to reach the government’s growth outlook for the full year. The AUDNZD pair, which is sensitive to Chinese financial data considering the status as the biggest trading partner, moved away from session-highs to trend near 1.0650.


Corporate Lending in Eurozone Stalls

The growth rate for loans extended to companies by banks in the Eurozone decelerated significantly in June, although loans to households remained steady near post-crisis peaks. ECB data revealed that loans to corporations in the Euro Area expanded by 2.10% for June, a shocking slowdown from the 2.50% pace recorded a month earlier. While the European Central Bank does not place heavy emphasis on individual data points, the deceleration should be a point of concern for officials considering a spike in loans has been a vital sign of the success of the ECB’s exceptionally loose monetary policy conditions. In the meantime, lending to households expanded 2.60% for June to remain steady on a monthly basis, still at its highest rate since early in 2009. Meanwhile, the French CAC 40 is tumbling after a disappointing retail figure released earlier, with the index last trading near 5120.


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