U.S. President Joe Biden and President Xi Jinping of China held a virtual summit, and the leaders of the world’s two largest economies faced tensions over trade, cyber threats, climate, and human rights.
Investors applauded the meeting between U.S. President Joe Biden, and Chinese leader, Xi Jinping, due to positive developments that favored the rise in copper prices.
Copper prices rose as the dollar weakened, leading to an improved risk sentiment among investors.
Three-month copper on the London Metal Exchange was up 0.4% at $9,711.50 a tonne at the same time as the most-traded December copper contract on the Shanghai Futures Exchange rose 0.2% to 71,070 yuan (11,154.01) a tonne.
The dollar retreated broadly against riskier currencies in early trading. It recovered slightly to hold near a 16-month high against the euro ahead of U.S. retail sales data, which could influence the outlook for interest rates.
A weaker dollar makes dollar-priced metals cheaper for other currencies.
Meanwhile, thanks to traders welcoming a dialogue between the U.S. and Chinese presidents, the yuan rose to a five-month high as the conversation between the two presidents appeared to be off to an amicable start.
Biden and Xi emphasized their responsibility to the rest of the world to avoid conflict. During the conference held via a virtual phone call, Xi called Biden an “old friend” emphasizing improved communication and cooperation between the two countries.
The two leaders have agreed to hold talks on their nuclear arsenals, having discussed their need for “strategic stability.” The move suggests that the United States is taking the nuclear threat posed by China more seriously.
The U.S. and China also reportedly discussed during their call a coordinated action to release strategic oil reserves in order to lower prices.
U.S. officials have been pressing their Chinese counterparts to close the gap on promised purchases of U.S. energy, agricultural products, and medical devices to improve other areas where China has not lived up to its trade commitments to respect intellectual property provisions.
A Rising Tide
While commodities were up broadly across the market, copper was up significantly more than the rest. While President Xi Jinping did not join other world leaders for the COP26 conference, it is clear that China’s participation in the summit with President Biden is a step in the right direction.
China has attempted to cool copper and other commodity prices by releasing state reserves to the market, to no avail. Prices continued to rise even after the reserves were released, following a slight drop in prices as traders adjusted.
Inventories on the LME are low, and shipping and other logistical backlogs are creating problems for deliveries for key metals and minerals. For now, the inventory issue will need to be solved in the short term, with future copper projects brought online faster than currently forecasted to keep up with demand.