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Metals

Metals markets eye potential impact from ongoing US-China talks: sources

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Metals markets eye potential impact from ongoing US-China talks: sources

London — Metals markets, alongside financials, have been whipsawing around on the ebbs and flows of the outcome, be it positive or negative, of the ongoing US-China trade war; leading to volatility and uncertainty.

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The market continues to get excited when President Trump tweets that the talks are going well, and then get hammered when no actual resolution to the dispute is pinned down.

"According to insider sources, the trade talks between the US and China have resulted in no rapprochement on the structural reforms of the Chinese economy that the US is demanding. The two parties have also made no real progress on other critical issues," Commerzbank told clients Friday.

However, the price of copper, as did the rest of the London Metal Exchange base metals complex, jumped higher during morning trade on LMEselect.

Three-months copper was spot bid $73 firmer as of 1125 GMT at $6,210/mt.

Prices ignored the gloom resulting from the ongoing trade chat, and instead focused on signs that Chinese fiscal stimulus measures were starting to filter through.

"Market participants are now waiting for statements from both sides as to how the talks went and what will happen next," added Commerzbank.

Max Layton, head of commodity research at investment bank Citi, said Friday that regardless of the outcome of the ongoing US-China trade negotiations, "cross-commodity correlations will likely strengthen further in the coming weeks. The commodity complex is expected to experience a broad-based rally if tariffs are rolled back or a sharp sell-off if trade talk breaks down and tensions re-escalate."

Layton added that even in a "kick-the-can" scenario, "we expect sizable price rallies in the metals and agriculture sectors."

China's January refined copper imports rose 9% year on year to 479,000 mt, up 14% from December, import data showed Thursday.

Some analysts warned the Lunar New Year holiday could have skewed demand figures for the month, while others pointed to a demand boost from restrictions on scrap imports.

"Analysts are cautioning that the January numbers could have been influenced by seasonal variables like the Chinese New Year, but data revisions aside, these certainly were decent numbers, at least as far as Beijing is concerned. Washington will not be as pleased given that they do not portray a significant reshaping of China's overall trade profile," INTL consultant Edward Meir's said in reaction.

Bart Melek, head of commodity research at TD Securities, said: "The Trump administration's rumored willingness to consider a 60-day trade truce extension is helping to firm sentiment across the commodity complex. Further, strong commodity trade data out of China also paints a less-gloomy picture."

-- Ben Kilbey, ben.kilbey@spglobal.com

-- Edited by Ikhhlaq Singh Aujla, newsdesk@spglobal.com