METALS-Copper prices rise as cooling US inflation boosts rate cut hopes

BY Reuters | ECONOMIC | 06/12/24 05:23 AM EDT

(Updates prices)

By Julian Luk

LONDON, June 12 (Reuters) - Copper prices bounced on Wednesday and the dollar tumbled after cooler-than-expected U.S. inflation data boosted expectations that the Federal Reserve could cut interest rates as soon as September.

Headline inflation, a key indicator for the Fed's rate policy, was flat last month, below expectations for a 0.1% gain.

Benchmark copper on the London Metal Exchange (LME) jumped immediately after the inflation data release. It traded up 2.3% at $9,981 a ton at 1300 GMT.

The red metal hit seven-week lows of $9,680 a ton on Tuesday and has retreated 11% from its all-time high of $11,104.5 on May 20.

Traders said expectations of a dovish statement from the Fed when it wraps up a policy meeting later in the day and a lower U.S. dollar - which makes dollar-priced metals cheaper for holders of other currencies - had triggered buying across the board in industrial metals.

In terms of fundamentals, long-term demand drivers for copper, including artificial intelligence, are yet to actualise, said Dan Smith, head of research at Amalgamated Metal Trading.

"Copper demand has hit a soft patch with more wire rod plants cutting operation in May after a sharp rally," he said.

High inventory levels pointed to a lacklustre buying appetite. Copper inventory remained at a four-year high of 336,964 tonnes in warehouses monitored by the Shanghai Futures Exchange (ShFE).

For other metals, tin jumped 4% to $33,200, after a dip to a one-month low last week. It has gained about 32% so far this year.

"We have seen some dip-buying by algorithmic traders in the past few days. Tin stocks are also decreasing," a tin trader said.

Algorithmic trading models, based on technical signals to buy or sell, have been "working better" in smaller markets like nickel, tin and zinc, Smith said.

ShFe's tin inventory has dropped 9.4% since the beginning of June, to 16,297 tons.

Aluminium was up 0.7% at $2,552, zinc rose 3% to $2,857.5, lead ticked up 0.8% to $2,173 and nickel was up 1.2%, at $18,025. (Reporting by Julian Luk; Editing by Sonia Cheema, Pooja Desai and Christina Fincher)

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