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Chinese Manufacturing Contracts Further
Following an impressive rally last week in response to news of Chinese stimulus measures, copper prices have come under heavy selling pressure on Monday. The move lower comes on the back of the latest Chinese economic data overnight which showed that the manufacturing sector remains in negative territory. The Chinese Caixin PMI fell to 49.3 in September, down from 50.3 prior and below the 50.5 the market was looking for. Notably, the new orders component of the data was seen falling to its lowest level in two years while the employment reading was seen contracting for the first time in seven months. Business sentiment was also seen hitting its lowest levels on record.
Stimulus Boost Fades
The data has put an end to the stimulus-drive rally, for now at least, with the futures market shedding around 3% from the week’s highs. Looking ahead, copper prices look vulnerable to further weakness if we see a downturn in risk appetite in response to worrying news out of the Middle East. Intensifying Israeli strikes on Beirut and threats of Hezbollah reprisal risk the situation boiling over into an all-out war. With stocks seeing a shaky start on Monday, any fuller risk-off tone this week should see copper continue to correct lower near-term ahead of the headline US NFP release on Friday.
Technical Views
Copper
The rally in copper ran into heavy selling interest ahead of the 4.8400 level with price now reversing quickly lower. While still atop the 4.5785 level, focus is on a continued push higher. Below there, however, focus turns to 4.3000 as the next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.