Chinese monetary policy looms over copper

SINGAPORE (Commodity Online): Chinese monetary policy concerns limited gains in the red metal copper, pulling its prices down at Shanghai Futures Exchange on Monday. Shanghai copper July futures settled down at 70740 Yuan after falling 1 percent.
The Chinese government has been incessantly raising interest rates recently in an effort to curb the inflation in the region that is already combating an apparent real estate bubble, which compounds the inflationary situation.
Rest of the base metals also did not hesitate to follow suit and fell during the first trading day of the week. The Chinese government has hitherto raised benchmark interest rates four times since last October and two times so far during 2011.
Nevertheless, the inflation seems to be flourishing despite the counter measures launched by the Chinese government. National Bureau of Statistics showed that Chinese consumer price index (CPI) rose to 5.4 percent year on year from the previous 4.9 percent. Chinese CPI is the highest in the last 32 months for March 2011.
The selling pressure witnessed in stock markets owing to the MENA geo-political crisis and the possibility of further interest rate hikes from the Peoples Bank of China also contributed towards the weakness in base metals. The markets were also pressured as S&P changed the outlook for US AAA credit rating negative. Additionally, the London Metal Exchange was on a holiday on Monday owing to Easter.
Official Chinese Customs data also showed that the imports of copper fell 43 percent during the month of March as compared to the same time previous year.
However, the International Copper Study Group has forecasted the deficit to reach 380,000 from the previous expectation of 250,000 tonnes for the year 2010.

(Source: http://www.commodityonline.com/news/Chinese-monetary-policy-looms-over-copper-38426-3-1.html)