SINGAPORE, July 11: London copper rallied more than 2 percent to its highest in a week on Thursday, after U.S. Federal Reserve Chairman Ben Bernanke said accommodative monetary policy would be needed for the foreseeable future.
Shanghai copper rallied more than 4 percent at one stage as some investors rushed to cover short positions, while solid turnover in LME copper suggested the upward move may have further to run.
‘The Fed minutes stabilised markets, then we really took off when Bernanke spoke – he sounded more dovish than the minutes,’ said INTL FC Stone analyst Ed Meir.
‘It’s swinging the pendulum from an imminent cessation of easing to one where we’re not sure if he’s going to pull the trigger in September.’
Bernanke reiterated the need for monetary policy accommodation for the foreseeable future and cast doubt over the strength of the U.S. Labour market, after monetary policymakers released the results of their most recent minutes.
About half the Fed’s policymakers felt the central bank’s bond-buying stimulus should be brought to a halt by year end when they met in June, but many wanted reassurance the U.S. Jobs recovery was on solid ground first.
A weak dollar has lubricated industry in the world’s second biggest economy, underpinning metals demand and fuelling investment in commodities.
Three-month copper on the London Metal Exchange hit its highest since July 4 at $6,994 a tonne, before edging back to $6,945.75 by 0210 GMT, still up 1.77 percent and extending gains from the previous session.
The most-traded November copper contract on the Shanghai Futures Exchange surged more than 4 percent to 50,790 yuan, the highest since June 19, before easing to 49,940 yuan a tonne, up 3.22 percent.
Hopes for looser policy were also driving gains in China, after dismal trade figures for June sparked hopes Beijing would need to cut banks’ reserve rate requirement ratio
China warned on Wednesday of a ‘grim’ outlook for trade after a surprise fall in June exports, raising fresh concerns about the extent of the slowdown in the world’s second-largest economy and increasing the pressure on the government to act.
China’s top planning body is preparing to let foreign exchanges open commodities warehouses in free-trade zones, sources with government links said, which would grant the London Metal Exchange coveted access to the industrial giant.
(agencies)
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