Industrial metal prices soared on Friday as trade war fears eased, boosting shares in leading mining companies.
Copper for delivery in three months on the London Metal Exchange rose more than 4 per cent to $6,362 a tonne and was headed for an 8 per cent gain on the week, while nickel climbed 4.7 per cent to $13,225 and zinc advanced 2.1 per cent to $2,521.
“This week the trade war was escalated and markets shrugged it off with copper rallying. The reason is the market has already factored in an extended stand-off between the China and US,” said analysts at Goldman Sachs.
Friday’s gains came in the face of a strong US dollar, a factor that usually weighs on commodity prices. A strong US dollar makes raw materials more expensive for holders of other currencies.
“The dollar is strong because the US economy is stronger than expected, not because the Fed is over-tightening” said Goldman. “A strong growth impulse from the world’s largest consumer can only be a positive when viewed in aggregate.”
Metal prices and miners have been under pressure since June on fears the China-US trade spat could lead to a slowdown in global growth.
Those worries have receded this week after policymakers in Beijing flagged a fresh focus on infrastructure investment.
“This week has seen China’s Politburo promote measures to support consumption announcing tax cuts and plans to boost infrastructure spend,” said Alastair Munro of Marex Spectron.
“Then overnight we read reports that China plans to sell bills offshore — a move which should drain liquidity from system ergo supportive of the yuan. This follows various bank calls for a weaker dollar into year end. All of which is bullish.