COPPER futures regained some of the ground lost in last week’s selloff this morning, rising sharply as some investors saw a buying opportunity, while others were lured back to the market by the view Europe was on the verge of easing its debt crisis.
The most actively traded copper contract, for December delivery, rose US15.65 cents, or 4.8 per cent, to settle at $US3.4395 a pound on the Comex division of the New York Mercantile Exchange.
Copper rose along with commodities and equities, as reports euro-zone leaders may expand the currency union’s bailout fund suggested demand for industrial metals may not fall as much as previously expected.
Copper, which is sensitive to the growth outlook because of its widespread use in construction and manufacturing, has closely tracked developments in Europe’s debt crisis, as a potential default by a member state could spur a credit crunch that would rattle industrial as well as financial markets.
Industrial metals plunged last week, with copper declining 17 per cent as traders pared their expectations for global growth. Some analysts say the sell-off pushed prices too low, as copper supply is widely expected to continue to fall short of demand this year despite the slowdown in developed economies.
Strong growth in Asia “is likely to provide a floor to metals prices — and a buying opportunity for longer-term investors — even if the West slows over the coming months,” analysts with Standard Chartered said Tuesday in a research note.
The copper market also received a boost this morning from a report from the Federal Reserve Bank of Chicago showing manufacturing output in the Midwest region rose 0.6 per cent in August from a month earlier.
A separate index of manufacturing in the central Atlantic region showed declining activity in September, but an improvement from August’s pace of contraction.
Tuesday’s gains don’t necessarily signal the pullback in metals is over, said Jimmy Tintle, a broker with Transworld Futures. “This looks like a short-term rally,” he said. “The longer-term trend may be down.”
Copper was due for a bounce, analysts said, after falling 22 per cent in September through Monday’s close as global manufacturing data pointed to weakening activity. Futures early Monday slid to 14-month lows.
