Copper Rallies on Tuesday

Copper prices are rising today as traders digest news that China is considering a huge new stimulus package aimed at reviving falling stock markets. Reports overnight point to plans to mobilise around $300 billion in funds held in offshore accounts by state owned businesses. The capital will be used to invest in onshore business through state owned investment vehicles.

Traders Looking for Further Measures

The plan is being drawn up on the back of the benchmark Chinese CSI 300 index hitting fresh five year lows this week. The index is down almost 30% from 2023 high following a protracted sell off last year as fears over the Chinese property sector ballooned. While news of the plan has been welcomed initially, there are many who question the longer-term impact of such a package. Typically, previous episodes of state-buying in the stock-market have proved ineffective unless accompanied by other measures. With that in mind, traders are now keen to see whether the Chinese government announces more measures in coming days and weeks.

Downside Risks Remain

For now, the lift in Chinese stocks is helping drive copper prices higher. However, with broader concerns over the economy still a major issue, the lift might prove temporary unless we see accompanying measures announced alongside the stock market purchases. As such, copper remains vulnerable to fresh downside unless more announcements are made.

Technical Views

Copper

The sell off from the 3.9410 level has stalled for now into a test of the broken bear trend line. With the 3.6745 level below, this is a key support area for the market. While this area holds, a further rotation towards the 3.9410 level can be seen. However, below this area, 3.5475 is the next support to note. 

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