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China accounts for 40% of global copper imports, and the price of the red metal has drifted lower over the past few six months as traders were concerned about a potential drop in Chinese demand due to the country’s manufacturing sector shrinking. Over the weekend, a handful of Beijing-backed banks issued loans to Shanghai finance houses to ensure the credit lines don’t dry up anytime soon. Some investors are viewing this move a backdoor stimulus boost. The result has been an increase in demand for copper, as traders feel there could be more cash injections to come, which might then stimulate an increase in manufacturing.
Overnight, Japan announced a drop of 2.7% in core machinery orders for June. Economists were expecting a decline of 7.1%, so the report is relatively positive. The Bank of Japan has been pursuing an aggressive monetary policy in an attempt to boost output, and prime minister Shinzo Abe is considering cutting corporate tax to offset the increase in sales tax. This could also have a positive impact on the price of copper.