Metals Slump, Dollar Gains as Traders Weigh Biden-Xi Summit

(Bloomberg) -- Industrial metals declined after the dollar strengthened as traders weighed the outcome from a first face-to-face summit between top leaders from the U.S. and China.

The greenback rose to a one-month high after Federal Reserve Bank of St. Louis President James Bullard said the central bank should speed up its reduction of monetary stimulus in response to a surge in U.S. inflation. A stronger dollar reduces metals’ appeal for foreign investors.  

“A round of selling” picked up in base metals, with particularly notable declines in copper and aluminum, spurred by the stronger dollar, according to Ed Meir, an analyst at ED&F Man Capital Markets.

Meanwhile, U.S. President Joe Biden and Chinese leader Xi Jinping spoke of the need for cooperation in their first face-to-face summit, which went on longer than expected even though they announced no major breakthroughs. China is the top consumer of all commodities, and any potential further commitments of Chinese buying would boost prices.

Most main metals fell in London, with aluminum down 3.2% and nickel dropping 0.8%. 

For copper, a month after an unprecedented squeeze roiled the market, a short-term spread is back to normal levels as rising exchange inventories relieve the pressure on buyers. The spread between spot and three-month contracts on the London Metal Exchange eased to a $32.50-a-ton premium by Monday’s close. The premium signals that near-term supply is still tight.

The metal was down 1.4% at $9,536 a ton by 5:12 p.m. on the LME. 

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