Copper bounces off six-year trough
Copper futures have closed higher in London, as the surprise rate cut by China's central bank bolstered hopes for stable demand from the world's second largest economy after months of price falls in the red metal and others.
The London Metal Exchange's three-month copper contract closed up 2.3 per cent at $US5,065 a metric tonne at the PM kerb close, a two-day high.
On Tuesday, the People's Bank of China said that it cut interest rates by one-quarter of a percentage point and reduced bank reserve requirements by half a percentage point, This came after the Shanghai Composite Index closed down 7.6 per cent, after a similar decline on Monday.
"The base metals complex rallied strongly heading into the early afternoon" on the news of a rate cut, Standard Bank said in a note.
China consumes more than 45 per cent of global copper supply, so metal prices closely mirror its economic trajectory. Market participants anticipate that an injection of stimulus will lead to greater demand and higher prices.
Looking ahead, base metal prices are expected to rise in the near-term as Chinese demand for the metal increases slightly.
"We expect a modest ... recovery in Chinese sentiment and demand [in the fourth quarter of 2015 or first quarter of 2016], which may present a fresh opportunity to establish shorts," Deutsche Bank said in a note.
Demand outside of China, however, is seen to pose more problems than demand inside the Asian powerhouse.
"Ex-China emerging markets look to be a bigger concern for future demand, following the currency moves and capital flight seen," Macquarie said in a note.
Among the other base metals, aluminIum closed up 2.3 per cent at $US1,557 a tonne, zinc closed up 1.9 per cent at $US1,739 a tonne, nickel closed up 2 per cent at $US9,710 a tonne, lead closed up 1.3 per cent at $US1,680 a tonne and tin closed up 1.4 per cent at $US14,250 a tonne.