London copper prices settle down, weighed by dollar strength and economic worries

LONDON copper prices fell on Monday, weighed down by a robust dollar and higher warehouse inventories and as US policy makers debated whether to withdraw economic support faster than expected.

Three-month copper on the London Metal Exchange (LME) was down 0.5% at $9,603 a ton, as of 0306 GMT, while the most-traded January copper contract on the Shanghai Futures Exchange (ShFE) gained 1.2% to 70,320 yuan ($11,014.52) a ton, tracking Friday’s gains in London.

A stronger dollar makes greenback-priced commodities more expensive to buyers holding other currencies.

An early rate hike by the US Federal Reserve could reduce liquidity in financial markets and slow recovery in the world’s biggest economy. Copper is often used as a gauge of global economic health.

On-warrant inventories in LME warehouses stood at 62,575 tons, their highest since Oct. 11.

Meanwhile, fresh coronavirus-led restrictions in Europe weighed on market sentiment.

FUNDAMENTALS: China’s central bank on Friday said it would keep its prudent monetary policy “flexible and targeted” and strike a balance between economic growth and risk controls.

Copper premiums in China spiked to a record high last week as an administrative issue over value-added tax (VAT) on imports exacerbated tight supply amid decade-low inventories in the world’s biggest consumer of the metal.

ShFE aluminum gained 1.2% to 18,980 yuan a ton, nickel climbed 2.3% to 148,030 yuan a ton, and zinc rose 1.1% to 22,865 yuan a ton.

LME aluminum slipped 1.1% to $2,649 a ton, nickel eased 0.4% to $19,960 a ton, zinc dropped 0.7% to $3,214 a ton, and lead rose 1.3% to $2,243.5 a ton.

MARKETS NEWS: The safehaven dollar traded close to a 16-month high to the euro on growing anxiety over the impact of surging coronavirus disease 2019 (COVID-19) infections in Europe.

Asian stocks made a soft start to the week while oil and the euro were under pressure, as the return of COVID-19 restrictions in Europe and talk about hastened tapering from the Fed put investors on guard. —