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Copper prices edged higher on Wednesday, as traders found comfort in prospects that U.S. interest rates have hit a peak and China will unleash more economic stimulus.
Three-month copper on the London Metal Exchange CMCU3 was up 0.1% at $8,027 per metric ton in official open-outcry trading after a 1% decline in the previous session.
U.S. bond yields have dropped from their highest levels since 2007 as Fed officials have hinted that rate hikes are over.
“In the short term, the drop we’re seeing in bond yields in the U.S. is providing support to markets in general and also to metals,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“We’re certainly keeping an eye on China to see if they’ll spring a few surprises in terms of adding more stimulus.”
A Bloomberg report said China was preparing a new round of stimulus to help its economy.
Investors, however, are still wary about the housing crisis in China, the word’s biggest metals consumer, which has been weighing on the outlook for its economy and for metals demand.
China’s largest private property developer Country Garden 2007.HK warned on Tuesday about its inability to meet offshore debt obligations.
Also weighing on prices was further evidence of an expected surplus of copper as mines ramp up amid weak demand.
LME data on Wednesday showed another rise in inventories, bringing the total to a 17-month high.
LME copper has rebounded after touching the lowest in more than four months last week at $7,870 a ton.
“There’s no doubt that last week’s rebound was critical. It’s fairly clear where the line in the sand is to the downside and that needs to hold,” Hansen said.