Copper prices ease with Fed meeting, China rebound in focus

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Copper prices dropped on Tuesday after traders exercised caution ahead of an eventful week that will include central bank meetings and as physical demand in top consumer China remained stagnant.

Three-month copper on the London Metal Exchange was down 0.8% at $9,134 a tonne by 0556 GMT, while the most-traded March copper contract on the Shanghai Futures Exchange dipped 0.7% to 69,220 yuan ($10,249.20) a tonne.

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The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) is due to end its two-day meeting on interest rates on Wednesday.

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Interest rate announcements are due on Thursday from the Bank of England and the European Central Bank – and both are expected to hike rates by 50 bps.

“Markets are weaker because of FOMC and they appear weak because of the run-up while China was on break,” said a metals trader.

Traders are also squaring some positions ahead of the U.S. non-farm payroll data due on Friday.

“It’s taking risk off the books when it’s such a binary incident,” the trader added.

Both copper contracts, however, are still set for a monthly gain, backed by a weaker U.S. dollar, rising inflows from funds and hopes that Chinese demand for the metal will improve following the removal of its strict COVID-19 restrictions.

Prior to China’s week-long Lunar New Year holiday that started Jan. 23, LME copper prices posted their fifth straight weekly gain.

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China’s manufacturing activity swung back to growth in January, beating expectations, as a wave of COVID-19 infections passed through the country faster than expected.

However, physical demand of copper in China remained tepid.

LME aluminum fell 0.9% to $2,567 a tonne, zinc declined 0.9% to $3,415.50 a tonne, tin shed 2% to $29,220 a tonne, while lead rose 0.2% to $2,163.50 a tonne.

SHFE aluminum eased 0.7% to 18,930 yuan a tonne, tin declined 1.8% to 234,400 yuan a tonne, lead eased 0.3% to 15,245 yuan a tonne while zinc rose 0.4% to 24,375 yuan a tonne.

SHFE nickel was up 1.2% at 221,930 yuan a tonne. Earlier in the session, it hit 223,290 yuan a tonne, its highest in 3-1/2 weeks, as the Philippines considered taxing nickel ore exports.

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($1 = 6.7537 yuan) (Reporting by Mai Nguyen in Hanoi; Editing by Sherry Jacob-Phillips)

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