Most industrial metals, and copper in particular, are trading lower today after Chinese president Xi Jinping's keynote speech offered no fresh initiatives to stimulate the country’s economy. The speech was held to mark the 40th anniversary of the Reform and Opening Up campaign that helped trigger the country’s economic boom. HG copper dropped to a one-month low but has so far managed to stay within the sideways trading formation seen since July.
With the combination of the ongoing trade war between the US and China and recent weakness in key economic data such as retail sales and industrial production, the market has been looking for action from the world’s biggest consumer of industrial metals.
While headline risks to copper remain elevated, the fundamental outlook has been providing some support on expectations that the market will tighten into 2019. We favour the upside on the back of increased risk of additional Chinese stimulus measures raising demand at a time where global mine production looks set to contract. The key risk events for industrial metals, apart from Wednesday’s FOMC meeting, will be China’s annual Central Economic Work Conference which kicks off Wednesday and which will run into Friday.
This is the forum where detailed plans for the year ahead are revealed and given the current outlook some additional measures to stimulate the economy may see the light of day.