METALS-Weak China data sparks industrial metals sell-off

BY Reuters | ECONOMIC | 08/15/22 06:13 AM EDT

(Rewrites throughout, adds comment and London dateline)

By Pratima Desai

LONDON, Aug 15 (Reuters) - Industrial metal prices fell on Monday as worries about demand in top consumer China surfaced due to weak economic data and a firmer dollar, but interest rate cuts by the country's central bank provided some support.

Benchmark copper on the London Metal Exchange was down 2.5% at $7,890 a tonne at 0958 GMT, 4% below the six-week high of $8,214 hit on Friday.

"Chinese data was disappointing, suggesting a bigger hit than expected from COVID restrictions," a metals trader said, adding that a higher dollar had also triggered fund selling.

"But there is a positive - interest rate cuts from the PBOC (People's Bank of China)."

China's economy unexpectedly slowed in July, with growth in industrial output, fixed-asset investment, total social financing and new yuan loans slowing.

Meanwhile Chinese property developers sharply cut investment in July, while new construction starts suffered their biggest fall in nearly a decade.

However, China's central bank unexpectedly cut key interest rates for the second time this year on Monday in an attempt to revive credit demand to support growth.

A rising U.S. currency making dollar-priced metals more expensive for operators in other currencies weighed, while worries about manufacturing due to concern about microchip supplies from major producer Taiwan added to negative sentiment.

"Just remember, from your humble toaster all the way up to your car, there are microchips at work," said Kingdom Futures Chief Executive Malcolm Freeman.

A visit to Taiwan by U.S. House of Representatives Speaker Nancy Pelosi earlier this month has created tensions between China and the United States.

Part of China's response involved its military surrounding the self-ruled island in what Taiwan said amounted to a practice "blockade".

Elsewhere, aluminium prices were also under pressure from record high Chinese production in July as smelters ramped up after power restrictions were eased.

Aluminium prices fell 2.1% to $2,384 a tonne, zinc slipped 1.6% to $3,533, lead was down 1.4% to $2,154, tin ceded 2.5% to $24,550 and nickel lost 4.6% to $21,970. (Reporting by Pratima Desai; Editing by Jan Harvey)

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