BR:London copper rises on softer dollar, China optimism
SINGAPORE: London copper futures rose 1 percent on Monday, helped by a softer dollar and a decision by top consumer China to remove controls on bank lending rates, which may help revive the slowing economy.
While not yet viewed as a game changer, China's latest move may have begun the countdown to an eventual overhaul of the country's financial sector.
Some analysts say cheaper credit could help support the world's No. 2 economy which has seen year-on-year growth fall in nine of the last 10 quarters, denting the outlook for demand for industrial metals.
"That did a play a role in reassuring markets that the government is interested in reforming the banks and also raised some hopes that because of this new lending rate regulation, the banks would now have an incentive to lend more to the real economy or the small and medium-sized enterprises," said Sijin Cheng, commodities analyst at Barclays Capital.
But Cheng said the actual impact of the new rule may be smaller than hoped for. Beijing scrapped the floor on lending rates although few loans are extended near that floor anyway.
"But it seems like the government is moving in bigger steps (in terms of reforms) and will likely continue," Cheng said.
Three-month copper on the London Metal Exchange climbed $69.25 to $6,984.25 a tonne by 0701 GMT. The contract fell about half a percent last week after two weeks of gains.
The most-traded November copper contract on the Shanghai Futures Exchange closed up 0.8 percent at 50,350 yuan ($8,200) a tonne.
Other base metals were also firmer.
The weaker dollar, down about 0.2 percent against a basket of currencies, boosted other commodities including oil and gold as well by making assets priced in the greenback cheaper for holders of other currencies.
Investors are eyeing Wednesday's HSBC flash manufacturing PMI data for China. China's in-line second-quarter gross domestic product growth of 7.5 percent did not rattle markets last week although a weak factory reading should spur caution being the first indicator for the second half of the year.
China is likely to achieve its growth target of 7.5 percent this year, though it may not gain traction next year as the government trades short-term growth for long-awaited reforms, according to a Reuters poll.
