Uddrag fra Merril Lynch analyse
Copper has long been considered one of the favored leading indicators used by analysts to
help predict global economic activity, lending itself to the nickname “Doctor Copper.” With
the overwhelming end-usage of the red metal concentrated toward building construction,
infrastructure, transportation equipment and industrial machinery, it’s no wonder that its
demand has shown strong leading properties as a gauge of the business cycle.
As forwarddiscounting mechanisms, markets dynamically sniff out clues to help project growth patterns, which makes copper one trip to the doctor that investors don’t mind taking. Since the midpoint of last year, Doctor Copper had portrayed a bleak outlook having lost -15.4% from June 2018 through October 2019, yet equity markets seemed to shrug
off the dour prognosis, posting gains of 8% in the MSCI All Country World Total Return
USD Index during the period. However, while the equity market advanced, other leading
indicators also declined, and a global growth slowdown was ultimately confirmed.
Weaker manufacturing, lower global trade activity, and a cloudy geopolitical backdrop weighed on growth. In this case, it appears markets were able to shrug off a short-term slowdown. Most recently the outlook has shifted positively, with copper having advanced over 4% since bottoming on September 3, 2019. This recent price spike may be influenced by supply concerns revolving around margin compression affecting miners in addition to
labor disruptions in Chile and Peru, both major global suppliers of the red metal.
However, copper’s recent ascent also coincides with a recent pickup in other leading indicators including global manufacturing Purchasing Managers Index (PMI), shipping indexes, global money supply and financial conditions. From this perspective, copper is among the components that may be foretelling a fourth mini-wave of global expansion. Moreover, BofA Merrill Lynch (BofAML) Global Research notes that copper has been a proxy for trade disputes and may be fundamentally undervalued due to those headline risks; however, slowing demand in China could pressure prices into next year.
