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London copper futures edged higher on Thursday, bouncing off the previous session’s three-week low after another soft Chinese manufacturing report suggested Beijing may have to do more to stimulate the world’s No. 2 economy.
Chinese factory activity contracted for the third month in May and output shrank at the fastest rate in just over a year, a private survey showed.
But the flash HSBC/Markit Purchasing Managers' Index (PMI) improved slightly to 49.1 from 48.9 in April.
“The fact that the PMI is higher than the previous number suggests that going forward we can expect some improvement in the Chinese economy and that’s supportive of metals prices,’’ said Phillip Futures analyst Daniel Ang, who is targeting copper to hit $6,500 in the near term.
China’s central bank is widely expected to cut interest rates further in coming months, on top of three reductions since November, and may also lower banks’ reserve requirements again to reduce companies’ borrowing costs and encourage more lending.
LME copper
Three-month copper on the London Metal Exchange was up 0.6 per cent at $6,256.50 a tonne by 0704 GMT, after touching $6,194 on Wednesday, its weakest since April 30.
The most traded July copper contract on the Shanghai Futures Exchange rose 0.4 per cent to close at 45,120 yuan ($7,276) per tonne.
Also supporting sentiment, according to minutes of the US central bank’s April policy meeting, Federal Reserve officials believed it would be premature to raise interest rates in June even though most felt the US economy was set to rebound from a dismal start to the year.
The dollar came off Wednesday’s highs versus a basket of currencies, making dollar-priced commodities more attractive for buyers using other currencies.
LME nickel
LME nickel rose 0.5 per cent to $13,170 a tonne, continuing a modest recovery from Tuesday’s 4.8 per cent plunge fuelled by a surge in inventories to a record high.
Stocks of nickel in LME warehouses rose to 446,640 tonnes, indicating sluggish global demand.
Shanghai nickel for July delivery fell 2.4 percent to 101,070 yuan a tonne after sliding by its 5 per cent downside limit on Wednesday.
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