Copper futures bounced back Tuesday, with copper miner stocks and sector-related exchange traded funds leading the charge, on hopes of increased demand as China expands its stimulus measures.
The iPath Dow Jones-UBS Copper Subindex Total Return ETN (NYSEArca: JJC), an exchange traded note, rose 1.0% Tuesday after falling off 8.1% over the past month.
COMEX copper futures were up 0.6% Tuesday, trading around $2.74 per pound after falling over the previous six sessions, its longest losing streak since the start of March.
Additionally, the producers equities-backed First Trust ISE Global Copper Index Fund (NasdaqGM: CU) jumped 4.1% Tuesday while the Global X Copper Miners ETF (NYSEArca: COPX) surged 4.2%. Over the past month, CU declined 12.9% and COPX fell 11.4%.
China’s central bank announced it will allow lenders to issue certificates of deposits to individuals and companies, and the bank will add cheap funds to the finance system, reports Debarati Roy for Bloomberg.
“China is the biggest story for metals, so any kind of steps taken by the government is always positive for copper,” David Meger, the director of metal trading at High Ridge Futures LLC, said in the article.
The improving Chinese economic outlook is also bolstering copper assets, which slumped over the past on growth concerns in China, the world’s largest consumer of industrial metals.
“Copper demand is picking up in China and the mining side of things has not performed so well this year. We’re getting some really strong signals from fabricators about demand from the power sector,” Vivienne Lloyd, metals analyst at Macquarie, said in a Reuters article.
Additionally, the depreciating U.S. dollar also helped bolster commodities prices – a weak greenback makes it cheaper for foreign buyers, like China, to acquire USD-denominated commodities. The USD was head for its largest decline in 10 weeks against a basket of 10 currencies on speculation that the Federal Reserve could push off a rate hike due to weakening economic data.
“There is no consistency in the data, and more and more people are beginning to believe that the Fed may hold rates at this level longer than earlier estimated,” Meger added. “The dollar’s weakness is definitely helping metals.”
First Trust ISE Global Copper Index Fund
For more information on the copper market, visit our copper category.
Max Chen contributed to this article.