Fed's rate cut interpreted as a positive, copper gains
LONDON, March 4 (Reuters) - Copper prices climbed on Wednesday as traders interpreted the U.S. central bank’s rate cut as a positive move that will ease liquidity conditions, but worries about demand in top consumer China dominated the mood.
Benchmark copper on the London Metal Exchange was untraded in official rings, but bid up 0.9% at $5,716 a tonne. Prices of the metal used by investors as a gauge of economic health touched $5,780.5 on Tuesday, the highest since Feb. 21.
The U.S. Federal Reserve cut interest rates on Tuesday in a bid to shield the world’s largest economy from the impact of the coronavirus, in what was seen as an emergency move.
“It spooked markets in the sense of what do they know that we don’t. But people have realised the intention was to calm and ease financial conditions which have been tightening due to falling equities,” said Julius Baer analyst Carsten Menke.
“Data from China is sparse at the moment and that leaves the market very susceptible to sentiment swings, but it is important to watch things like inventories in China.”
VIRUS: Worry about the damage to growth and demand from the spread of the coronavirus from China to other countries have roiled equity and commodity markets in recent weeks.
“The current situation is worryingly unique, because unlike the SARS episode of 2002-2003, the world is considerably more integrated,” ED&F Man analyst Edward Meir said in a note.