Federal Reserve’s hawkish tone weighs on copper, as zinc, nickel, tin strengthen

LONDON — Copper steadied on Friday but was still on track for its biggest weekly drop since early May as markets priced in a higher US interest rate environment that would support the dollar.

Benchmark copper on the London Metal Exchange (LME) was flat at $5,664.50 a ton at 1445 GMT but down more than 2% over the week.

“The hawkish tone from the Fed has sapped some of the interest for commodities in general and copper also,” said Ole Hansen, head of commodities strategy at Saxo Bank.

“The dollar is starting to show some teeth again and that adds to the reduced demand for commodities.”

The US Federal Reserve raised interest rates last week and indicated further tightening before year-end, boosting the dollar and making commodities priced in the greenback more expensive for holders of other currencies.

Data last week showed China’s economy generally remained on a solid footing in May, but tighter monetary policy, a cooling housing market and slowing investment reinforced views it will gradually lose momentum in the coming months. China is the world’s largest user of copper.

Chinese steel futures rose sharply for a third straight session, supported by government efforts to tackle a glut, even as the outlook for demand in the world’s top steel consumer may not be too promising, particularly from its property sector.

Zinc was up 0.80% at $2,525 a ton as steel prices lent support, helping it recoup most of the week’s losses.

Nickel rose 1.20% to $ 8,960. Nickel last week touched its lowest level since June 2016 but was set to end the week barely changed.

LME aluminum was flat at $1,873 after touching its lowest in more than a month in the previous session. Aluminum was on track for its third straight weekly decline.

The number of Americans filing for unemployment benefits fell more than expected last week, pointing to shrinking labor market slack that could allow the Fed to raise interest rates again this year despite moderate inflation growth.

CME Group says New York Mercantile Exchange, Inc. and Commodity Exchange, Inc. plan to expand the location for the storage and delivery of zinc delivered against the zinc futures contract to Europe and Asia.

Tin rose 1% to $19,690 a ton while lead was up 0.60% at $2,105. —