Copper rebounds as China and US ready trade talks

LONDON — Copper prices rallied on Friday from the previous day’s 18-month low after China cut bank reserve requirements and announced new trade talks with the United States.

The moves sparked optimism that the world’s top commodities consumer can prevent a rapid economic deceleration, lifting other industrial metals and Chinese, European and US stock markets.

Benchmark copper on the London Metal Exchange (LME) closed up 3.2% at $5,918 a ton, its biggest one-day gain since September. But the metal used in power and construction was down 1.3% over the week after a warning by Apple of weaker than expected iPhone sales in China underlined concerns about the Chinese economy. Copper prices fell 18% last year.

“China’s easing (of reserve requirements) has managed to turn round the downtrend,” said Societe Generale analyst Robin Bhar. “But all this could retrace next week, depending on the trade talks. If the trade dispute escalates, this rally will be short-lived.”

However, Mr. Bhar said he expected industrial metals prices to rise by 5-10% this year because any weakness in demand would be offset by tight supply.

China’s central bank cut the amount of cash that banks have to hold as reserves for the fifth time in a year, freeing up $116 billion for new lending.

China and the US will hold trade talks in Beijing on Jan. 7-8.

Chinese factory activity contracted for the first time in 19 months in December, though data on Friday showed the services sector continued to expand.

Robust employment data, meanwhile, underscored the strength of the US economy.

Copper, zinc, aluminum and lead stocks in LME-registered warehouses remain near decadelows. Tin inventories are close to the lowest on record and nickel stocks are the least in five years.

Inventories of copper, aluminum and zinc in Shanghai Futures Exchange warehouses are also down sharply from highs last year.

Exacerbating fears of a supply squeeze, LME data showed single entities hold significant proportions of aluminum, nickel and zinc warrants.

Among other industrial metals, LME aluminum ended up 1.6% at $1,865 a ton; zinc rose 2.5% to $2,438; lead climbed 0.9% to $1,950; and nickel gained 2.2% to $11,110. Tin closed down 0.1% at $19,550. —