Copper Sends Mixed Signals on World Economy as Bulls Do a Runner
(Bloomberg) -- Copper could play a part in dampening spirits in markets uplifted by the first round of the French election.
Money managers’ long-only positions in the metal, often used as a barometer of global economic health due to its widespread use, are at their lowest since the U.S. election, according to the latest weekly data from the Commodity Futures Trading Commission.
“Buy-side went risk off last week (as of April 18), which may be driven more by growth concerns than French election,” Bank of America Merrill Lynch said in a note. Data through April 18 showed net-long positions at 39,159, the least bullish in more than five months. The short-only total was also the highest in more than five months.
The price of copper traded in London declined almost nine percent from a February high to a low last week. Goldman Sachs said in a recent note the selloff in metals was driven by uncertainty over the global economic outlook, with factors such as stalled policy stimulus in the U.S., tightening in China and geopolitical uncertainty weighing on sentiment.
However, Goldman remains “constructive” on the outlook for copper fundamentals, which should get a boost from China’s property sector and a sharp slowdown in supply. It also noted the correlation between U.S. 10-year Treasury yields and copper. Benchmark yields climbed six basis points on Monday following the first round of the French election, rising for a fourth straight day.
Prices have in the past three days picked up from a 16-week low, while a Bloomberg survey of traders and analysts found that copper bulls outnumbered bears by more than two to one.