Copper climbed to its highest level since mid-July as metals rallied on the Federal Reserve’s bid to defend US growth and the labour market with a half-point rate cut.

After cautious trading earlier on Thursday, metals moved decisively higher to extend Wednesday’s gains. Copper rose 0.8% to US$9,477 a tonne by 2.26pm Shanghai time, while zinc rallied more than 1% and aluminium also racked up its highest in more than two months.

The Fed’s focus on quashing inflation had presented a key headwind for metals in recent years, along with deepening doubts over the health of China’s economy. Investors are now waiting to see if the Fed’s initial move shores up US growth, and stems a recent weakness in global manufacturing.  

The half-point cut unveiled by Fed chair Jerome Powell is “beneficial to expectations for a soft landing in the US,” Everbright Futures Co said in a note, adding that fundamentals for copper were gradually improving.

While most metals are solidly higher this year, their performances have fallen well short of widely-held bullish expectations — especially for copper. China’s demand has seriously disappointed, while uncertainty over the US presidential elections later this year has further hurt sentiment. 

“The increase in the medium-term outlook for rates should come as a positive, with metals highly sensitive to factory activity and overall economic growth,” ANZ Group Holdings said in a note.

There have been some signs of improvement in Chinese metals markets in the past month, with copper inventories in Shanghai Futures Exchange-tracked warehouses falling back towards normal levels. Premiums on imported copper have also rebounded to the highest since the opening days of 2024, after trading below zero for most of May and June.

  - Bloomberg