Commodity prices are popping Friday after China took significant steps to ease COVID-19 lockdowns and optimism from lighter-than-expected U.S. inflation data that sparked yesterday's huge stock market rally and sent the dollar sharply lower overnight.
Major commodities across the board traded higher following news that China cut the amount of time that travelers and close contacts of infected people must spend in quarantine, and measures isolating China's neighborhoods and mass testing measures also were scaled back.
In mid-morning trading in Europe, according to Dow Jones, Brent crude oil (NYSEARCA:BNO) +3% to $96.59/bbl, lifting its gains so far this month to 4.1%, three-month forward copper prices (HG1:COM) on the London Metals Exchange +2.2% to $8,440/metric ton, and LME aluminum (LMAHDS03:COM) +3.8% to $2,411/ton, boosting their monthly gains to 13% and 8%, respectively.
Relevant stocks - all of which rose Thursday - appear set to add to gains; in pre-market action, Freeport McMoRan (FCX) +3.4%, Southern Copper (SCCO) +2.1%, Teck Resources (TECK) +3%, Hudbay Minerals (HBM) +2.6%, Alcoa (AA) +3.8%, Century Aluminum (CENX) +3.7%.
Analysts say China's measures, enacted despite a rise in COVID cases above 10,000, represent the beginning of the end of China's zero-COVID policies, suggesting the weakest point of China's commodities demand has passed.
China's moves likely come just as Western commodity demand looked set to weaken and global commodity inventories are "critically tight," according to analysts at Goldman Sachs.
The news comes a day after U.S. inflation data was weaker than expected, prompting expectations that the Federal Reserve would ease its aggressive cycle of interest rate hikes.