Copper Sinks With PMI On The Horizon
Today’s Spotlight Market
Copper prices hit their lowest levels since July 2009 amid concerns over the release of Chinese PMI data later this week. Traders are far from bullish with regard to their expectations for the Manufacturing Purchasing Managers Index, slated for release on Thursday. There is also lingering fallout after Glencore Plc?s stock got crushed in London Trading. Investment firms have questioned the stability of the company?s balance sheet if metal prices continue to plummet. Glencore is the world?s third largest Copper miner .
Fundamentals
On the surface, Glencore?s instability could be viewed as being bullish for the Copper market. The company had suspended mining activity in the Democratic Republic of Congo and Zambia, which would take roughly 400,000 tonnes of the metal out of the market. However, weakening demand is the reason the company is suspending the mines in the first place. Both outsiders and company executives seem to have a rather bleak demand outlook for Copper in the foreseeable future. Goldman Sachs had predicted the slump in Copper prices could exceed last year?s due to the slowdown in Chinese economic activity. Chinese industrial companies earnings fell by $24.6 billion, or 9%, from last year. The hardest hit companies were raw material producers of Oil, coal and base metals. The 7% target growth rate for China would be the slowest pace of growth for the world?s second largest economy in 25 years. This does not bode well for Copper demand, as China accounts for somewhere between 40-45% of the world?s demand for the red metal. The Caixin flash Manufacturing Purchasing Managers Index, an independent report, showed the lowest reading in 6 ? years, suggesting the government?s figure will not fare well when it is released on Thursday.
Technical Notes – View Today’s Chart
Turning to the chart, we see the December Copper contract trading down near support near the 2.2500 level. Failure to hold support here could lead to a test of the 2.1000 and possibly the 2.0000 level. The 2.4615 level on the upside may be a level to watch, as this could be seen as a reversal. The RSI is currently oversold, which can be supportive in the near- term.
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