Copper drifts lower as concern about China saps confidence
Copper declined — tracking a broad slide in global risk assets — as concerns about China’s economy and widening housing crisis put markets in bearish mood.
The metal edged down on the London Metals Exchange and is headed for a third straight weekly loss. Pessimism over China’s growth prospects is building after the country’s state-owned property developers warned of widespread losses, fueling concerns turmoil is spreading from the private sector.
The Chinese real estate sector is a globally significant source of metals consumption and a crucial driver of the country’s economy. A gauge of major LME contracts is near its lowest since May as the gloom over the demand outlook intensifies.
While the country’s economic rebound following a year of lockdowns to curb coronavirus has already disappointed metals bulls, worse may be yet to come. Property woes have led to a cash crunch for shadow banking giant Zhongzhi Enterprise Group, further undermining risk appetite.
Chinese authorities are stepping up efforts to bolster financial markets and the yuan. The People’s Bank of China delivered a surprise interest rate cut this week, the biggest reduction since 2020, and its most forceful yuan fixing guidance ever on Friday.
The recent slide in the Chinese currency has eroded the buying power of local commodities importers, and blunted the impact of lower metals prices. Recent actions by the authorities have helped it consolidate.
Copper futures declined 0.2% on the LME by 12:16 p.m. local time. Zinc fell 0.7% and aluminum was up 0.2%. All metals except for lead were heading for weekly losses.
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