Off The Wire
METALS-Chinese stimulus hopes support copper
News that China will allow local governments to use proceeds from special bonds as capital for investment projects came after the United States and Mexico reached a deal on Friday to avert U.S. tariffs on Mexican goods, supporting prices of copper and other metals. [ Benchmark copper on the London Metal Exchange (LME) reached $5,956 a tonne in intraday trading before slipping back to finish only $2 up from Monday's close at $5,876.
Global stock markets rose while Chinese equities surged by about 3%. Fears that trade disputes will damage economic growth and metals demand had helped to push down copper prices by 15% from an April high to a five-month low of $5,740 on Friday.
"Optimism is stemming from talk of additional stimulus out of China," said Capital Economics analyst Ross Strachan.
"It's not a major surprise that markets have latched on to some positive news. It's been a bit of a bloodbath recently." Strachan expects copper to end the year around current levels.
MEXICO: The United States and Mexico may explore additional steps next month to restrict illegal immigration from Central America, with the threat of tariffs hanging over Mexico. CHINA: U.S. President Donald Trump on Tuesday defended the use of tariffs as part of his trade strategy while China vowed a tough response if the United States insists on escalating trade tensions amid ongoing negotiations. YUAN: China's central bank said it will sell yuan-denominated bills in Hong Kong in late June, which some analysts said was aimed at stemming a sharp weakening in the currency. DOLLAR: The dollar has weakened from last month's two-year highs, supporting metals by making them cheaper for buyers with other currencies. CHINA PREMIUMS: Chinese Yangshan copper import premiums have risen to $59 from two-year lows of $47 last month.
"As the premium has started to recover, we expect China's import appetite to recover again in June," said Argonaut Securities analyst Helen Lau. LEAD: LME lead closed 1.3% up at $1,914 a tonne as the premium for cash metal over the three-month contract surged above $40, its highest since early 2017, before slipping back. A premium points to tight nearby supply.
Stocks of lead in LME-registered warehouses are near their lowest since 2009. OTHER METALS: LME aluminium closed 0.2% up at $1,778 a tonne after touching a 29-month low on Monday. Zinc rose 1.3% to $2,506.50 and tin was down 0.4% at $19,160. Nickel was not included in closing rings but was up 1.8% in electronic trading at $11,885.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Top Base and Precious Metals Analysis -GFMS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Peter Hobson; Additional reporting by Enrico dela Cruz, editing by Louise Heavens and David Goodman)
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