IV:Copper rallies almost 2% after China, euro zone manufacturing data
Investing.com - Copper futures rallied sharply on Thursday, as the release of unexpectedly strong manufacturing data out of the euro zone and China boosted demand expectations for the industrial metal.
Prices fell on Wednesday after the minutes of the Federal Reserve’s July meeting indicated support for tapering.
On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at USD3.362 a pound during European morning trade, up 1.7%.
Nymex copper prices rose by as much as 1.8% earlier in the session to hit a daily high of USD3.368 a pound. The September contract settled down 0.95% at USD3.306 a pound on Wednesday.
Copper prices were likely to find support at USD3.287 a pound, Wednesday’s low and resistance at USD3.379 a pound, the high from August 16.
Futures moved higher after data out of China eased concerns over a slowdown in the world’s second largest economy.
Data on Thursday showed that the preliminary reading of China’s HSBC manufacturing purchasing managers’ index rose to a four-month high of 50.1 in August, up from 47.7 in July. Economists had forecast a reading of 48.3.
The measure climbed above the 50.0-mark for the first time since April, indicating expansion in manufacturing activity.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year and manufacturing numbers are often used as indicators for future demand growth.
Meanwhile, data out of the euro zone fuelled optimism over the region’s economic outlook.
The flash euro zone manufacturing purchasing managers’ index rose to 51.3 in August from a final reading of 50.3 in July. Analysts had expected the index to inch up to 50.8.
Germany’s manufacturing PMI rose to a 25 month high of 52.0, while the services PMI rose to a six-month high of 52.4.
Europe as a region is third in global demand for the industrial metal.
Copper prices were lower on Wednesday after the minutes of the Fed’s July meeting showed that officials were "broadly comfortable" with plans to scale back the bank’s USD85 billion-a-month stimulus program.
However, policymakers remain divided over the timing of possible reduction, with almost all committee members agreeing that a change in the asset purchase program was not yet appropriate.
The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.
Elsewhere on the Comex, gold for December delivery was little changed to trade at USD1,369.70 a troy ounce, while silver for September delivery rose 0.6% to trade at USD23.10 a troy ounce.
Moves in the gold and silver price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its quantitative easing program sooner-than-expected.
Market participants are now looking ahead to the release of weekly U.S. data on initial jobless claims later in the day.
Traders have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.
Any improvement in the U.S. economy was likely to reinforce the view that the central bank will begin to taper its bond purchase program in the coming months.
