Metal Prices Rise On China

Metals bounced higher on Friday as stronger than expected data came from China, with a copper rally not seen in one year. China reported a pick-up in factory production, investment, and real estate for construction in July, beating expectations. Data and import and export also rose indicating to investors that the Chinese economy is in the process of stabilizing after decelerating in nine of the last ten months.

A series of Chinese policy measures seem to have had a positive effect and reversed an economic slowdown and the fear of hard landing for the Chinese economy. Chinese analysts expect stable growth in the third quarter with a possible acceleration in the fourth quarter. The unexpectedly strong performance is driven mainly by a rebound in the production of steel, cement, power and non-ferrous metals. This underscores that China’s growth remains disproportionately reliant on credit fuelled infrastructure and property construction.

Global stocks remained close to five-year records as a possible Chinese turn around in the second half of 2013 fueled investors optimism, in spite of a week of mixed activity across the world’s biggest financial centers. This optimism fuelled markets in Europe, but failed to translate for long in the US, as investors took profits after continuous records on Wall Street over the last few weeks. The benchmark S&P index fell for the second week after a rise in stocks on 19% since the beginning of 2013.

In Europe the FTSE All World equity index hovered close to its best level since 2006 after especially large global mining companies climbed on the back of the Chinese data. Shanghai and the Australian stock exchanges jumped as well on the data. In currencies, the US Dollar index continued to lose ground on Friday, but gained against the Euro which eased 24 points to USD 1.3354. USD/JPY descended 0.3 % to 96.38. The Dollar is expected to be under downward pressure until the US Federal Reserve (FED) decides on when to start to taper monetary easing.