Copper falls amid weak China and U.S. data

Copper slipped today after it reached a two-week high of $3.398 on Wednesday amid concerns of reduced global supply. Fatal accidents in the Grasberg mine in Indonesia, which belongs to Freeport-McMoRan Copper & Gold, shut down the mine for three months. Prices found support by a positive reading of Chinas manufacturing PMI, which stood at 50.8. It surpassed the 50.6 forecast, which brought signs of stabilizing growth. However, the trend was reversed today as negative U.S. and China data came out on Wednesday and Thursday.

On the New York Mercantile Exchange, copper futures for July delivery traded at $3.331 a pound at 10:02 GMT, falling 1.21% for on the day.

U.S. reports said yesterday Factory Orders in April rose less than expected and gained 1%. This was significantly above the preceding months figure of a revised -4.7%, but still couldnt match the 1.5% increase forecast.

On Monday China’s final HSBC PMI showed a decline to 49,2, down from the flash reading of 49,6 and 50,4 in April. According to a Bloomberg survey, Chinas import growth in May probably shrank to 6,9%, way below Aprils 16.8% reading. The countrys export may have increased by 7.1% in May, which is two times less than Aprils reading of a 14.7% gain.

Alexandra Knight, an economist at National Australia Bank Ltd. in Melbourne said: “Overall data was more negative than what was anticipated. If you’ve got weaker data, that points to less demand, particularly for copper which is used a lot in construction.”

Copper traders consider shifts in China’s PMI reading as one of the main factors that influence copper prices. The metal is widely used in the Asian nation’s manufacturing sector. China accounts for around 40% of global demand.

Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong commented for Bloomberg on the fake data crackdown: “The crackdown from China’s foreign-exchange authorities on fake invoicing will bring the inflated export growth down to the real trend, which is single digits.” He projected a 5% gain in export for May.

Market players are looking ahead into key U.S. labour data. U.S. Initial Jobless Claims, due at 12:30 GMT, is supposed to bring some preliminary data about the labour market in the world’s biggest economy. Later on Friday, Change in Non-Farm Payrolls, Average Hourly Earnings and the Unemployment Rate will shed some light on the health of the U.S. economy, thus dampening or sharpening expectations about Fed’s monetary stimulus program.