Copper Slips on Tuesday

Copper prices have turned heavily lower today on the back of weaker Chinese economic data overnight. The Chinese Caixin manufacturing PMI for May was seen unexpectedly falling to 48.3 from 50.4 prior, well below the 50.3 the market was looking for. The data confirms that the factory sector fell back into contractionary territory last month, marking the first negative monthly reading in 8 months. The decline was also the largest seen since November 2022, prompting further concern over the impact of the ongoing US/China trade war, particularly in light of recent news that trade talks have stalled between the two sides.

Record Drop

Looking at the breakdown of the data, output was seen falling for the first time in 19 months while new orders fell at their fastest pace since 2022. Additionally, foreign sales hit their lowest level since summer 2023 and employment was seen continuing to fall. Purchasing activity was also weaker with supplier lead times seen slightly longer too.

Trade Uncertainty

In all, it was a weak showing for the factory sector in the world’s second largest economy and given the backdrop of renewed trade uncertainty, a worrying omen for what’s to come. Both the US and China have accused each other of breaching the terms of the 90-day agreement settled last month and while tensions remain high, copper prices look vulnerable to further decline as traders scale back their demand expectations.

Technical Views

Copper

For now, copper prices remain capped by the underside of the broken bull channel with price now back below the 4.8010 level. While below here, 4.5785 is the key support level to watch with risks of a deeper push seen if we breach that level, in line with falling momentum studies readings.