Copper is trading at 320 cents per pound and traders are closing out their short positions after the red metal’s poor start to 2014.
At the weekend Beijing revealed a drop of 50.5 in China’s manufacturing purchasing managers index (PMI) for January. This compares with a reading of 51 in December, and it underlines the decline in the country’s activity. China is the single largest importer of copper in the world, and it is on holiday this week for Chinese new year. This means the next production report could be hit.
On Monday the US announced the Institute for Supply Management (ISM) manufacturing report, which came in at 51.3 in December. This was the lowest reading since May 2013, and it also put pressure on copper.
However, the financial markets do not move in straight lines and, as Alastair McCaig noted, the metal was in oversold territory, so it is no surprise we are seeing a bounce.