The price of copper is down over 2% today after China revealed worse-than-expected manufacturing numbers.
The HSBC manufacturing purchasing managers index (PMI) came in at 48.7 in June, whereas analysts were expecting a reading of 49.4. Any reading below 50.0 tells us that the sector contracted. This drop in Chinese manufacturing is the second monthly decline in eight months, which is a worrying sign. China is the largest importer of copper in the world, and if it is slowing down we could see a slump in global demand.
The strength of the US dollar is also playing a role in copper’s downward movement. All commodities are traded in dollars, as it is the global reserve currency, so when the dollar is strong commodities become relatively more expensive to buy. Last night, Ben Bernanke of the Federal Reserve stated the US could start tapering its stimulus package towards the end of this year or early next year. The US dollar has risen against most major currencies on the back of this news, and this in turn has pushed copper lower.