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Weak China data sparks industrial metals sell-off

08/15/2022 | 06:13am EDT

LONDON, Aug 15 (Reuters) - Industrial metal prices fell on Monday as concerns about demand in China surfaced due to weak economic data and a firmer dollar, but interest rate cuts by the country's central bank provided some support.

Benchmark copper on the London Metal Exchange was down 1% at $8,010 a tonne at 1607 GMT, down from the six-week high of $8,214 hit on Friday.

"Chinese data was disappointing, suggesting a bigger hit than expected from COVID restrictions," a metals trader said, adding that a higher dollar had also triggered fund selling.

"But there is a positive - interest rate cuts from the PBOC (People's Bank of China)."

China's economy unexpectedly slowed in July, with growth in industrial output, fixed-asset investment, total social financing and new yuan loans slowing.

Chinese property developers sharply cut investment in July, and new construction starts suffered their biggest fall in nearly a decade.

However, China's central bank on Monday unexpectedly cut interest rates for the second time this year in an attempt to revive credit demand to support growth.

"Fundamentals have reasserted themselves, reminding markets that they are still a force to be reckoned with," said Edward Meir, analyst at ED&F Man Capital Markets.

A rising U.S. currency, which makes dollar-priced metals more expensive for operators in other currencies, weighed, while worries about manufacturing due to concern about microchip supply from major producer Taiwan added to negative sentiment.

"Just remember, from your humble toaster all the way up to your car, there are microchips at work," said Kingdom Futures CEO Malcolm Freeman.

A visit to Taiwan by U.S. House of Representatives Speaker Nancy Pelosi earlier this month created tensions between China and the United States.

Part of China's response involved its military surrounding the self-ruled island in what Taiwan said amounted to a practice "blockade".

Aluminium prices were also under pressure from record high Chinese production in July as smelters ramped up after power restrictions were eased.

Aluminium prices fell 1.2% to $2,405 a tonne, zinc slipped 0.2% to $3,582, lead was down 0.5% at $2,173, tin dropped 2% to $24,680 and nickel lost 4.4% to $22,030. (Reporting by Pratima Desai; editing by Jan Harvey, Jason Neely and Barbara Lewis)


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
BANK OF CHINA LIMITED -0.78% 2.55 Delayed Quote.-8.54%
MSCI TAIWAN (STRD) -1.08% 459.986 Real-time Quote.-37.35%
POWER SOLUTIONS, LTD. -0.99% 2495 Delayed Quote.7.88%
S&P GSCI ALUMINUM INDEX 0.00% 136.9055 Real-time Quote.-23.24%
S&P GSCI INDUSTRIAL METALS INDEX -0.57% 398.6964 Real-time Quote.-19.65%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.24% 7.1457 Delayed Quote.12.14%
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