X
<

How Global Economic Data Dragged Base Metals Down

PART:
1 2 3 4 5
Part 2
How Global Economic Data Dragged Base Metals Down PART 2 OF 5

Strong US Dollar and Slow Eurozone GDP Weigh on Copper

Eurozone GDP slowed down in 3Q15

In the week ending on November 13, in addition to the weak Chinese economic data, the rising strength of copper and slowdown in the Eurozone kept the pressure on copper prices.

Strong US Dollar and Slow Eurozone GDP Weigh on Copper

Interested in GLEN? Don't miss the next report.

Receive e-mail alerts for new research on GLEN

Success! You are now receiving e-mail alerts for new research. A temporary password for your new Market Realist account has been sent to your e-mail address.

Success! has been added to your Ticker Alerts.

Success! has been added to your Ticker Alerts. Subscriptions can be managed in your user profile.

Europe is the second-largest consumer of copper after China. European GDP was released on November 13, revealing a slowdown. According to the data released by Eurostat1, the Eurozone’s GDP for the third quarter of 2015 came at 0.3%. This was below the expected reading of 1.4%.

This weakness in GDP is due to a fall in international exports. Given the weak economic situation in the top consumers of copper, demand concerns took the center stage and resulted in a 3.3% fall for copper in the week ending November 13.

Strong US dollar and interest rate hike signals

In addition to disappointing Chinese data, the strong U.S. dollar also kept the pressure on copper and other base metals. The US dollar kept getting stronger because of rising expectations of an interest rate hike in December. In the week ending on November 13, the US dollar traded around the seven-month high levels and increased gravity on base metals. A rise in the US interest rate in December would make the US dollar stronger. In turn, that would bring the prices of copper and other base metals to levels lower than they are trading at right now.

In addition to its impact on base metals, the potential rise in the interest rate would trigger bearish moves in struggling base metal mining companies. The weak global demand outlook for base metals resulted in falls for top mining companies like Rio Tinto (RIO), Freeport-McMoRan (FCX), and Glencore (GLEN) last week. Also, the SPDR S&P Metals & Mining ETF (XME) and the PowerShares DB Base Metals Fund (DBB) ended the week in losses. Both are major base metal ETFs.

  1. The statistical office of the European Union
X

Please select a profession that best describes you: