July 29, 2019 / 12:34 PM / 2 months ago

METALS-Copper gains before U.S.-China trade talks, data deluge

* GRAPHIC-2019 asset returns: tmsnrt.rs/2jvdmXl

* Cash zinc at premium over three-month contract

* Focus on U.S. Federal Reserve meeting (Adds closing prices, comment)

By Pratima Desai

LONDON, July 29 (Reuters) - Copper prices rose on Monday before planned U.S.-China trade talks and a flood of economic data, while shrinking profits at Chinese industrial firms highlighted the headwinds facing demand in the top consuming country.

Benchmark copper on the London Metal Exchange (LME) ended up 0.9% in official rings to $6,018 a tonne.

“This will be an eventful week for base metals as investors await signals from key economic data releases and trade talks restart between China and the U.S.,” ING analyst Wenyu Yao said. “Metals markets will be more influenced by the macro side.”

GROWTH: Data due this week includes surveys of purchasing managers in China’s manufacturing sector, the U.S. monthly jobs report and ISM manufacturing survey, industrial output from Japan and growth figures from the euro zone.

FED: A major focus for markets this week is a meeting of the Federal Reserve on Tuesday and Wednesday. The U.S. central bank is widely expected to cut interest rates for the first time in more than a decade.

Lower rates will weigh on the U.S. currency, which when it falls makes dollar-denominated commodities cheaper for importers using other currencies, potentially boosting demand.

INDUSTRY: Profits earned by China’s industrial firms contracted in June after a brief gain in May.

TRADE: U.S. and Chinese negotiators meet in Shanghai this week for their first talks since a G20 truce last month, a change of scenery for two sides struggling to resolve deep differences on how to end a year-long trade war.

“We doubt anything will come out of these talks, but if the two sides keep the dialogue going, that would be a positive in our view,” said INTL FCStone analyst Edward Meir in a note.

CHINA: Analysts say changes in China’s capital financing rules could boost infrastructure spending by 10% in the second half of this year from the same period last year.

“Of the three sectors with preferential capital treatment, utilities - power grid - stand out as the only sector with contracting investment year-to-date,” analysts at JPMorgan said in a note.

“If the additional infrastructure investment were to be spent on China’s utilities sector, this could result in 500,000 tonnes of additional copper demand.”

ZINC: Historically low stocks in LME-registered warehouses MZNSTX-TOTAL and one company holding large amounts of warrants and contracts with nearby expiry dates <0#LME-WHT> have fuelled concern about supplies on the LME market.

This can be seen in the premium for cash zinc over the three-month contract CMZN0-3 at $12 a tonne compared with a discount a week ago.

Benchmark zinc was up 1.3% at $2,469 per tonne, helped by data showing China’s June imports of refined zinc jumped 57% from the same time last year to 56,878 tonnes.

PRICES: Aluminium gained 0.5% to $1,811 a tonne, lead slipped 0.9% to $2,047, tin fell 0.3% to $17,600 and nickel added 1.8% to $14,360.

Reporting by Pratima Desai; additional reporting by Mai Nguyen; Editing by Dale Hudson and Jan Harvey

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