LME copper futures market digests Sino-US trade agreement

SMM1, March 17-(LME) copper futures on the London Metal Exchange hit an eight-month high on Thursday after the United States and China ended a protracted trade dispute and signed the first phase of an economic and trade agreement to boost hopes of a recovery in metal demand.

17:00 London time on January 16 (01:00 Beijing time on January 17), LME copper for three months closed down 0.2% at $6277.5 a tonne. Intraday trading hit its highest level of $6343 since May 1.

"from a fundamental point of view, the outlook for copper is much better than last year, and from a macro point of view, trade agreements have improved things," said Timothy Wood-Dow, an analyst at BMO Capital Markets. "

"We do not believe that the first phase of the trade agreement will have a significant impact on base metals prices, but the resulting stability will be a gradual positive impact," it said. "

There are still some key problems between the world's two largest economies because even if China promises to increase its purchases of US goods and services, some tariffs still exist.

On Thursday, data from China, a major consumer of metals, exposed the negative effects of the trade dispute.

New home prices in China slowed to their slowest pace in 17 months in December, while new bank lending fell more than expected last month, despite a record amount of new credit for the whole of 2019.

Analysts said China was expected to introduce more monetary easing and fiscal stimulus this year to stimulate economic growth, which bodes well for metal demand.

A measure of manufacturing activity in the mid-Atlantic rebounded in January to its highest level in eight months, with the outlook for the brightest in more than a year and a half.

U. S. retail sales also rose for the third month in a row in December.

U. S. senators approved the U.S.-Mexico-Canada trade agreement.

Falling inventories also supported prices, with LME copper stocks falling 1275 tonnes to 126775 tonnes, the lowest level since March, and copper inventories down more than 60 per cent since August.

However, LME spot copper is wider than the three-month copper discount, indicating that the market is in full supply in the near future. The discount hit $34.50 a tonne, the highest level in more than three months.

The next technical target for copper is $6433, a 50 per cent Fibonacci retracement, according to broker Marex Spectron.

In other metals, LME three-month zinc and lead hit two-month highs, with zinc up 1.6 per cent at $2422 a tonne and lead up 0.2 per cent at $2002 a tonne.

Three-month aluminum closed 0.6 per cent higher at $1812 a tonne;

Three-month tin closed 1.3% higher at $17670;

Nickel for the three-month period fell 3.2% to $13775 a tonne.

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