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Copper Rallies on Chinese Stimulus, Reduced Coronavirus Fears

February 5, 2020 at 17:59 by Andrew Moran

Copper futures are rallying more than 1% midweek to their best levels since late last month. The industrial metal is gaining on China injecting liquidity into financial markets and investors ostensibly reducing their Wuhan coronavirus fears. Can the red metal sustain this rally or will prices retreat?

April copper futures tacked on $0.0385, or 1.51%, to $2.5805 per pound at 16:44 GMT on Wednesday on the Comex division of the New York Mercantile Exchange. Copper prices have plunged 8% so far this year, but they have rebounded close to 1% in the last week.

Over the weekend, the People’s Bank of China (PBoC) injected $174 billion into the economy to cushion the stock market. On Wednesday, the central bank added another $71.5 billion into the financial system to support liquidity. Beijing is rolling out 30 stimulus measures to limit the economic fallout from the coronavirus that has crippled the world’s second-largest economy and impacted equities.

After their return from the prolonged Lunar New Year holiday, investors played catch up and hit the sell button. Since then, however, Asian markets have recovered: the Shanghai Composite rose 1.25%, the Nikkei added 1.02%, and the Hang Sang jumped 0.5% to settle the Wednesday trading session.

Meanwhile, in industry news, China’s copper smelters will decrease output by more than 15% this month due to the coronavirus outbreak. The research branch of the China Nonferrous Metals Industry Association (CNMRA), Antaike, anticipates a reduction in copper demand.

Across the country, manufacturers have shut down operations over virus concerns. This is bad news for the red metal since copper is widely used in manufacturing, such as housing, automobiles, construction, and electronics. Some analysts say that if this continues for at least two weeks, then copper demand could slump to levels not seen since the 2003 SARS outbreak.

China is the world’s largest copper consumer.

Although financial markets are confident that the coronavirus will be contained, the numbers tell a different story. The death toll has hit 490 and the number of confirmed cases has topped 24,000.

In other metal markets, April gold futures picked up $6.00, or 0.38%, to $1,561.50 per ounce. March silver futures edged up $0.02, or 0.14%, to $17.585 an ounce. March platinum futures surged $20.10, 2.08%, to $986.20 an ounce. March palladium futures tumbled $1.30, or 0.06%, to $2,334.30 per ounce.

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