Iron ore price hits 2-week high on improved Chinese economic outlook

It hit an intraday high of 788.5 yuan, its strongest level since July 22.

The benchmark September iron ore contract on the Singapore Exchange was 0.76% higher at $104.6 a ton, also its highest since July 22, as of 0720 GMT.

Growth in China’s services activity accelerated in July, expanding for the 19th straight month, a private-sector survey showed on Monday.

The Caixin/S&P’s composite PMI index, which tracks both the services and manufacturing sectors, eased from June but remained in expansionary territory, and employment rose at the fastest pace in 11 months, the survey found.

Meanwhile, China’s State Council on Saturday published a communique to promote the “high-quality development of service consumption”.

The document listed measures to “boost the vitality” of the country’s consumption, including improving the quality of products and services, and offering financial support for consumption such as tax deductions and credit support.

With domestic demand as one of the bigger drags on China’s economy this year, it is a good sign policies are coming into play to support consumption, though markets may still be hoping for larger scale demand-side supportive policies such as consumption vouchers, said ING analysts in a note.

The steel market is expected to rebound this week, as increased stimulus efforts boosted market confidence last week, and demand for building materials is expected to recover, said Hexun Futures, a financial information site specializing in futures.

Steel benchmarks on the Shanghai Futures Exchange were stronger. Wire rod climbed about 1.5%, hot-rolled coil advanced 0.74%, rebar gained around 0.4%, and stainless steel added about 0.1%.

Other steelmaking ingredients on the DCE gained ground, with coking coal and coke up 0.25% and 0.35%, respectively.

($1 = 7.1440 Chinese yuan)

(By Gabrielle Ng; Editing by Janane Venkatraman and Emelia Sithole-Matarise)