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Shanghai copper pares its losses amid optimism about rate cuts; trade tensions to be watched

Shanghai copper pares its losses amid optimism about rate cuts; trade tensions to be watched

Shanghai copper pared early losses on Monday, boosted by expectations for further U.S. Federal Reserve interest rate cuts. Investors remained vigilant of U.S. China trade tensions.

The Shanghai Futures Exchange's most active copper contract closed the daytime trading lower by 0.2% at 85,650 Yuan ($12 020.55) per metric tonne.

Early in the session, the contract traded at a low of 83,820 Yuan per ton. This was a drop of more than 1%.

As of 0822 GMT, the benchmark three-month price for copper had also recovered from Tuesday's losses, rising by 1.06% and trading at $10,690 per ton.

Red metal prices were supported by renewed U.S. interest rate cuts as Jerome Powell, the U.S. Federal Reserve chair's Tuesday speech signaled an unchanged economic outlook compared to weeks ago when policymakers cut rates and predicted two more reductions this year.

Powell pointed to the weakening job market as a sign that he should consolidate a rate reduction later this year despite the still high and possibly rising inflation.

Copper prices rose after Powell's speech as the dollar weakened. Investors using other currencies can get cheaper commodities when the dollar is weaker.

The market was supported by concerns over a shortage of supply due to disruptions in the mining industry, including the Grasberg mine suspension. This helped to limit any price decline.

The market continued to focus on the tensions surrounding US-China trading relationships. On Tuesday, Donald Trump, the U.S. president, threatened to end some trade relations with China over cooking oil.

Trump's threat was the latest escalation of trade tensions ahead of a high-stakes summit between Trump and his Chinese equivalent Xi Jinping in South Korea later this month.

Beijing has sent a conciliatory message, stating that its export control on rare earths does not represent a complete export ban. However, it left the door open to talks.

Scott Bessent of the U.S. Treasury Department said that talks between leaders in South Korea were still proceeding according to schedule.

Nickel grew 0.37%. Lead climbed 0.91%. Tin was up 0.2%.

$1 = 7.1253 Chinese yuan renminbi $1 = 7.1253 Chinese Yuan Renminbi (Reporting and editing by Janane Vekatraman; Lewis Jackson, Dylan Duan)

(source: Reuters)