Investor jitters were reflected with the bidding up of safe haven assets such as gold and yen. USD/JPY pulled back from Tuesday’s intraday high of 121.85 to as low as 118.00 before covering some of its losses.
One of the biggest jumps came from copper, where prices rose by nearly 3% from Tuesday’s intraday low of $2.8655 per pound to a high of $2.9505 per pound.
The spike in copper prices was further fuelled by news of a potential mining strike in Peru, which sparked supply concerns. Reports indicate that workers at Peru's biggest copper and zinc mine, Antamina, are likely to go on an indefinite strike today to push for a bonus and other benefits. The workers had just ended a 19-day strike on 30 November, which the mine said had not affected its production of around 30,000 tonnes per month. Antamina contributes about 30% of the country’s copper, where Peru is the world's third largest producer.
Will the push in copper prices be sustainable? In the longer term, the fundamentals have largely remained unchanged with the demand outlook still not showing any convincing signs of revival. Notably, Chinese macroeconomic data in the form of this week’s trade balance figures and last week’s Purchasing Managers Index (PMI) have continued to disappoint.
Copper prices along with other commodities should respect the longer term fundamentals, so any gains will be capped by the sluggish demand outlook. Once news of the mining strike peters out, prices are likely to return under pressure. This makes a pop in prices an attractive consideration to sell into the rally.