Copper slides after PPI data

The price of copper is lower today after the latest Chinese producer price index (PPI) failed to impress investors.

Overnight, Beijing announced that the country’s PPI came in below expectations. The survey, which covers the cost of raw materials used in the manufacturing sector, dropped 2.7% in June compared with May. This comes after HSBC’s manufacturing PMI dropping to a nine-month low last week.

Dealers have therefore been selling the red metal, as China accounts for 40% of global copper purchases; if their manufacturing sector is slowing down, it could be seen as an indication that copper demand will be low in the future. Investors will therefore be keeping a keen eye on Chinese development going forward.

Tomorrow the US Federal Reserve will be making an announcement, and since copper is traded in US dollars a large move in the currency could impact the metal. As the most recent non-farm payrolls report came in above expectations, investors feel that next month the US could reveal a drop in unemployment. If this happens, and the Fed talks about the rising strength of the US economy, a resulting tightening of their monetary policy could boost the dollar and drive down copper.

High grade copper chart

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