Futures on the London Metal Exchange fell 0.9% on Monday, erasing earlier gains. The dollar rose on news of the French prime minister’s resignation and the near-certain elevation of a pro-stimulus candidate as Japan’s next prime minister. A stronger dollar weighs on commodities like copper, making them more expensive for buyers in other currencies.
But the sector is facing tighter supply due to disruptions at major mines, including Indonesia’s Grasberg, the world second-biggest. Freeport-McMoRan Inc. declared force majeure at the operation last month after mud flooded underground tunnels, and has slashed production guidance.
Later this week focus will shift to US data, including jobless claims and a gauge of inflation expectations, though their release may be disrupted by the ongoing government shutdown.
On Friday, Federal Reserve Bank of Dallas President Lorie Logan said the central bank is further away from its inflation target than it is from the maximum employment goal, reiterating that officials should move cautiously with rate cuts. Looser monetary policy typically benefits non-yielding assets such as copper, while also weakening the dollar they’re priced in.
A Fed rate-cut cycle, “despite the economy being relatively strong should be bullish for commodity prices,” Christopher LaFemina, an analyst at Jefferies Financial Group Inc., wrote in a note. Still, there’s a risk of an inflationary commodity price-spike that damages the economy, he added.Copper dropped 0.7% to trade at $10,639.50 a ton as of 9:55 a.m. in London. Most other metals were flat or slightly lower. Iron ore was little changed at $103.90 a ton. Trading volumes are likely to be lower due to a Chinese holiday.
as a Reliable and Trusted News Source
