Copper set for fourth straight monthly drop as recession fears bite

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London copper prices were on track for their fourth consecutive monthly fall on Friday, as weaker demand outlook in top consumer China, an elevated U.S. dollar and growing fears about a global recession weighed on the metal.

Three-month copper on the London Metal Exchange was down 0.1% at $7,752 a tonne, as of 0540 GMT, after hitting its highest since July 8 at $7,830 in the previous session on hopes of slower U.S. rate hikes.

Copper, which is used as a gauge of economic health by investors, has declined about 6.1% so far this month, tracking its longest monthly run of losses since August 2015.

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The most-traded September copper contract on the Shanghai Futures Exchange rose 1% to 59,710 yuan ($8,856.29) a tonne.

“Despite the dovish Federal Reserve boosting anticipatory assets like stocks, commodities trade in the real world of gloom and recessionary doom,” said Stephen Innes, managing partner at SPI Asset Management.

“I think the Fed will stay on its mission to tame inflation at the expense of growth and that will limit copper’s top side ambitions.”

Sharply higher interest rates, red-hot inflation and a prolonged energy crisis are leading to conviction that the world economy is headed inexorably towards recession.

DOLLAR: The dollar rose to its highest in nearly two decades earlier this month, making greenback-denominated metals more expensive for other currency holders.

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DATA: The U.S. economy unexpectedly contracted in the second quarter, raising the risk that it was on the cusp of a recession.

COVID: China is sticking to its “dynamic zero-COVID” policy, state media said after a high-level meeting of the ruling Communist Party on Thursday.

FACTORY OUTPUT: Japan’s factories ramped up output at the fastest pace in more than nine years in June as disruptions due to China’s COVID-19 curbs eased.

NICKEL: Russian metals producer Nornickel said on Thursday its second-quarter nickel production fell by 6% quarter-on-quarter to 48,472 tonnes.

PRICES: LME aluminum climbed 0.4% to $2,465 a tonne, zinc rose 0.7% to $3,181.50 and lead gained 1% to $2,017, while tin fell 1.2% to $24,060.

Shanghai aluminum gained 1.7%, zinc rose 0.7%, nickel climbed 1.2% and lead rose 0.3%, while tin lost 0.6%. ($1 = 6.7421 Chinese yuan) (Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu)

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