Copper is trading at 295 cents per pound, flat on the day as traders don’t know which way to turn following the poor Chinese manufacturing PMI report. The red metal is off over 12% since the start of the year because of concerns the Chinese economy is slowing down. For the second consecutive month, China has reported weak manufacturing numbers and traders have been taking additional short positions.
Whenever China goes through a period of weak growth, it is not unusual to see the People's Bank of China (PBC) announce a stimulus package to boost it. There is talk of the Chinese central bank injecting cash into the credit market, which explains why we have been seeing some buying in copper. If the PBC does provide any liquidity to the Chinese interbank market, we could see copper head towards the 300 cents per pound mark.