June 11, 2019 / 10:46 AM / 8 days ago

METALS-Chinese stimulus hopes support copper

(Updates with closing prices)

By Peter Hobson

LONDON, June 11 (Reuters) - Copper prices touched their highest in two weeks on Tuesday, lifted by hopes that top consumer China will pump money into building metals-intensive infrastructure.

News that China will allow local governments to use proceeds from special bonds as capital for investment projects came after the United States and Mexico reached a deal on Friday to avert U.S. tariffs on Mexican goods, supporting prices of copper and other metals. [

Benchmark copper on the London Metal Exchange (LME) reached $5,956 a tonne in intraday trading before slipping back to finish only $2 up from Monday’s close at $5,876.

Global stock markets rose while Chinese equities surged by about 3%.

Fears that trade disputes will damage economic growth and metals demand had helped to push down copper prices by 15% from an April high to a five-month low of $5,740 on Friday.

“Optimism is stemming from talk of additional stimulus out of China,” said Capital Economics analyst Ross Strachan.

“It’s not a major surprise that markets have latched on to some positive news. It’s been a bit of a bloodbath recently.”

Strachan expects copper to end the year around current levels.

MEXICO: The United States and Mexico may explore additional steps next month to restrict illegal immigration from Central America, with the threat of tariffs hanging over Mexico.

CHINA: U.S. President Donald Trump on Tuesday defended the use of tariffs as part of his trade strategy while China vowed a tough response if the United States insists on escalating trade tensions amid ongoing negotiations.

YUAN: China’s central bank said it will sell yuan-denominated bills in Hong Kong in late June, which some analysts said was aimed at stemming a sharp weakening in the currency.

DOLLAR: The dollar has weakened from last month’s two-year highs, supporting metals by making them cheaper for buyers with other currencies.

CHINA PREMIUMS: Chinese Yangshan copper import premiums SMM-CUYP-CN have risen to $59 from two-year lows of $47 last month.

“As the premium has started to recover, we expect China’s import appetite to recover again in June,” said Argonaut Securities analyst Helen Lau.

LEAD: LME lead closed 1.3% up at $1,914 a tonne as the premium for cash metal over the three-month contract MPB0-3 surged above $40, its highest since early 2017, before slipping back. A premium points to tight nearby supply.

Stocks of lead in LME-registered warehouses are near their lowest since 2009. MPBSTX-TOTAL

OTHER METALS: LME aluminium closed 0.2% up at $1,778 a tonne after touching a 29-month low on Monday. Zinc rose 1.3% to $2,506.50 and tin was down 0.4% at $19,160.

Nickel was not included in closing rings but was up 1.8% in electronic trading at $11,885.

Reporting by Peter Hobson; Additional reporting by Enrico dela Cruz, editing by Louise Heavens and David Goodman

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