Copper futures hit 7-week peak after China rate cut

Investing.com - Copper prices rose to a seven-week high on Monday, after China’s central bank unexpectedly cut interest rates for the second time in less than four months, indicating that Beijing is becoming more aggressive in supporting the economy as its momentum slows and deflation risks rise.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

On the Comex division of the New York Mercantile Exchange, copper for May delivery jumped 1.5 cents, or 0.55%, to trade at $2.706 a pound during European morning hours after hitting an intraday high of $2.716, the most since January 13.

Futures were likely to find support at the $2.636, the low from February 26, and resistance at $2.729, the high from January 13.

The People's Bank of China cut its benchmark interest rate by a quarter percentage point to 5.35% over the weekend in an effort to boost growth and stave off deflation in the world's second largest economy.

A pair of manufacturing reports released over the past two days painted a mixed picture of the health of China's manufacturing sector.

The HSBC final manufacturing index for February released earlier rose to 50.7, above the flash reading of 50.1.

In contrast, the official China's manufacturing purchasing managers' index published on Sunday came in at 49.9 in February, just above expectations for a reading of 49.7 and up slightly from a two-year low of 49.8 in January.

Elsewhere on the Comex, gold futures for April delivery ticked up $5.20, or 0.43%, to trade at $1,218.30 a troy ounce, while silver futures for May delivery advanced 15.0 cents, or 0.91% to trade at $16.70 an ounce.

Gold remained supported as traders pushed back expectations for the timing of the first U.S. rate hike following comments made by Federal Reserve Chair Janet Yellen last week.

Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.15% to 95.44, the highest level since 2003.

The greenback remained supported after the Commerce Department reported on Friday that U.S. gross domestic product grew at an annual rate of 2.2% in the last three months of 2014, down from an initial estimate of 2.6% but ahead of expectations for a downward revision to 2.1% growth.

In addition, the February reading of the University of Michigan's consumer sentiment index was revised up to 95.4 from the preliminary reading of 93.6. While this was down from the previous months final reading of 98.1, it was still the second highest level since January 2007.

Investors were looking ahead to the U.S. Institute of Supply Management's report on U.S. manufacturing activity later in the day for further indications on the strength of the economy.