Copper futures turned around after a difficult morning session after apparent details of the ECB’s bond-buying programme leaked to the wider market.
China fears have weighed heavily on commodities in recent days, as investors fret about a further downturn in the world’s second-largest economy. Iron ore prices hit a three-year low overnight, mainly due to Chinese worries, and copper had given back many of the gains it had made in the wake of Ben Bernanke’s speech last Friday. Weakening demand in China, which accounts for 40% of global copper consumption, had dragged the red metal lower, although hopes of government stimulus did offset some of the losses. However, the picture changed rapidly after news emerged regarding what plans Mario Draghi has to help save the euro.
It appears that unlimited purchases of government bonds will be involved, and that the bank will avoid putting a public cap on yields. More detail will be needed tomorrow, but I suppose for now this is a useful first step. In relation to copper, a real rescue plan will be positive for risk appetite, weakening the dollar and giving a boost to commodities.