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Copper Futures Dip As Investors Doubt Imminent US-China Trade Deal

November 6, 2018 at 17:50 by Andrew Moran

Copper futures are sliding on Tuesday as investors are increasingly doubtful that the US and China will reach a trade agreement before the end of the year. The industrial metal is also dipping ahead of the US midterm elections and an upcoming Federal Reserve meeting that will raise bets that there will be a December rate hike.

December copper futures tumbled $0.015, or 0.55%, to $2.74 per pound at 16:24 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. Copper prices have had a superb five days, gaining nearly 3%, but they are still down 18% year-to-date.

President Donald Trump recently tweeted that he had a “very good conversation” with Chinese President Xi Jinping, which sparked a rally in the industrial metal. However, hopes were dampened when chief White House economic adviser Larry Kudlow confirmed that both sides are not close to striking an agreement.

Unlike other markets, copper has been sensitive to the ongoing trade spat between the world’s two largest economies. Since Beijing is the biggest consumer of the red metal, any economic contraction, trade spat, or sour financial data impacts copper’s movements.

The red metal has also been sensitive to the surge in the US dollar. On Tuesday, the greenback was flat at 96.31, but the currency has climbed about 5% so far this year. A stronger buck is bad for commodities pegged in dollars because it makes it more expensive for foreign investors to purchase.

Investors are paying close attention to the US midterm elections. The results may influence both the dollar and financial markets as analysts are already forecasting that should the Democrats retake the House, then it could tank equities.

On Thursday, the Fed will complete its two-day Federal Open Market Committee (FOMC) policy meeting, where it is expected to publish bullish language on interest rates for the December meeting. According to the CME Group FedWatch tool, there is a 77% chance of at least a 25-basis-point rate hike – the current target rate is 2.00% to 2.25%. This would send the greenback higher.

In other metals markets, December gold futures shed $3.90, or 0.32%, to $1,228.40 per ounce. December silver futures fell $0.09, or 0.66%, to $14.55 an ounce. December platinum futures tacked on $2.80, or 0.32%, to $872.20 per ounce. December palladium futures plunged $27.20, or 2.43%, to $1,094.90 an ounce.

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