The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Money managers have withdrawn over US$20 billion from bullish copper bets since mid-May, driven by mounting concerns about Chinese demand, triggering a rapid exodus from one of the key industrial commodities.
Copper prices surged to a record high above US$11,100 per ton in May due to unprecedented investor buying. However, prices have since fallen by more than 20%, with funds retreating significantly. This reversal is attributed to the weak demand from China, challenging investors’ long-term optimism for copper's use in data centers, renewables, and electric vehicles.
Key Takeaways:
- Massive Withdrawal: Over US$20 billion pulled from bullish copper positions since mid-May.
- Price Drop: Copper prices have fallen over 20% from their peak of US$11,100 per ton in May.
- Demand Concerns: Weak demand from China is a significant factor in the price decline.
- Current Status: Bullish positions on Comex and LME are back to March levels but remain historically high.
- Market Outlook: UBS analyst Daniel Major believes the market was overbought in May and momentum-based AI trades played a role. He expects the market to stabilize and consolidate in the near term, with smelters potentially cutting output due to low processing fees.
- Copper Prices: Copper traded 1% lower at US$8,932.50 per ton on the LME on Tuesday, heading for its lowest close since March.
Despite the current downturn, the fundamental outlook for copper remains constructive, with expectations of supply constraints providing confidence for remaining investors. The market is likely to wait for physical catalysts to drive future gains.
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