Copper price sees weakness below $3.40 as recession fears escalate

Copper prices drop below Monday’s lowest price as recession fears have escalated in the US economy. The base metal has delivered a south-side break of the consolidation formed in a narrow range of $3.41-3.44 and is aiming for more weakness as accelerating interest rates are challenging growth rate projections.

A poll from Reuters claims that a fourth consecutive 75 basis point (bps) rate hike by the Federal Reserve (Fed) in the first week of November is a done deal. It is worth noting that the Fed is behaving extremely aggressively ever to downsize the inflation rate. Therefore, policy-tightening measures have been continuously trending.

This has triggered the risk of recession ahead as the growth rate has been slashed sharply and unemployment levels are expected to ditch downside levels. Fears of a recession have bolstered further post commentary from US Treasury Chief Janet Yellen that “Cannot rule out risk” of a recession, reported MSNBC news.

Meanwhile, in China, copper imports have jumped by 25.6%, from a year ago. Infrastructure spending has accelerated amid the announcements of stimulus packages by the Chinese administration to dodge the consequences of the no-tolerance Covid approach and a real estate meltdown. Winters in Asia are known for a rebound in construction and real estate businesses after monsoons.

A note from ANZ Research claims that “Copper imports were up strongly as the outlook for demand from the power sector improves”

Going forward, policy announcements from China’s XI Jinping will remain the key after the continuation of his leadership for the third time.

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