While commodity prices remain under pressure (see discussion), a couple of developments are beginning to provide support in certain sectors. One example is copper, which is up some 3% on the day.
This increase is driven by two factors.
1. The dollar has weakened considerably in the last month and remains under pressure. The dollar weakness has also sent gold higher (up 2% today).
|Dollar index: DXY (source: Barchart)|
2. China, who accounts for roughly 40% of global copper demand, reported a surprisingly strong copper import number.
Reuters: - "The data supports our positive view that the period of destocking in China is over and we forecast an improvement in metals demand and also a stabilisation of growth in China over the coming months," said Eugen Weinberg, analyst at Commerzbank.
"Sentiment was also very downbeat in the market and the data has triggered some short-covering."
Data showed China's imports of copper rose 8.1 percent to 410,680 tonnes in July from 379,951 tonnes in the previous month.Obviously many remain skeptical about the sustainability of this rise in prices.
Reuters: - Some analysts said although the figures from China were positive, a seasonally slower month for demand could prevent sustained gains for the metal in the short term.Nevertheless this change could signal that at least for now the ongoing price declines in commodities could be coming to an end.
"Markets are near record shorts in copper so after positive news in China's trade data, we could see copper prices finally break out from the recent trading range, but I don't think it will be sustained," Natalie Rampono at ANZ in Melbourne said.
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