Copper gains as China’s manufacturing activity slowed, raised hopes for stimulus

Copper prices experienced a modest gain of 0.33%, settling at 722, driven by concerns over slowing manufacturing activities in China. The official NBS Manufacturing PMI for November 2023 slipped to 49.4, marking the second consecutive month of decline and falling below market forecasts. This decline underscored the need for additional government support to bolster economic growth in China. The NBS Non-Manufacturing PMI also dipped to 50.2, indicating the 11th straight month of expansion in the service sector but at the softest pace in the sequence. 

The Composite PMI Output Index edged down to 50.4, the lowest since December 2022, reflecting a contraction in factory activity for the second consecutive month. The challenges highlighted in the Chinese economy, coupled with a persistent struggle to maintain a robust post-pandemic recovery, raised expectations for further government stimulus. China has implemented measures such as increased bond sales for infrastructure investment and interest rate cuts to support economic activity. On the supply side, output in Chile declined by 4.4% year-on-year in October, reaching 464,311 metric tons, according to the country’s INE statistics agency. 

In the technical landscape, copper is currently undergoing short covering, with a 0.61% drop in open interest, settling at 5221. Support is identified at 718.9, and a breach below could test 715.8 levels. On the upside, resistance is anticipated at 723.9, with a potential breakthrough leading to prices testing 725.8.