Copper falls on weak China data and QE outlook

Copper fell on Thursday as decreased demand outlook from the metals biggest consumer, China, weighed on prices. Investors also laid eyes on tomorrows key U.S. economic data that is expected to be on track withs Fed projections as a step towards Quantitative Easing tapering.

Copper futures for September delivery traded at $3.149 a pound at 8:57 GMT, down 0.82% on the day. Prices ranged between days high and low of $3.179 and $3.147 per pound respectively. The industrial metal settled 0.9% higher yesterday, extending this weeks gains above 3% after ending last week 1.29% lower.

Copper is in strong correlation with Chinas economic activity as the country is the red metals biggest consumer, accounting for 40% of global consumption. Any positive or negative signs that indicate and unexpected expansion or contraction of the nations economy causes wide fluctuations in copper pricing. According to a 21st Century Business Herald report today, it may be difficult for China to realize a 7.5% GDP growth this year. Another Chinese PMI report yesterday showed a poorer performance by the country’s economy in June, compared to May. China’s non-manufacturing PMI dropped to 53.9, down from 54.3 in May.

On Monday, the National Bureau of Statistics and China Federation of Logistics and Purchasing reported China’s PMI fell to 50.1 last month, below May’s 50.8 figure, but above expectations of 50.0, which is the neutral level of the scale. Values above 50 indicate economic expansion and below 50 – contraction.

According to a separate private index prepared by HSBC and Markit Economics, operating conditions in China’s manufacturing sector worsened during June for a second month in a row. The Asian country’s HSBC PMI stood at 48.2 in June, down from May’s 49.2 reading and below projections of 48.3, straying further from the neutral level. Chinese manufacturers signaled a first reduction of output since eight months in June. Total new orders fell for a second month as client demand contracted. Staff numbers were also decreased, marking the fastest job shedding since last August.

This comes after the China Securities Journal reported on Tuesday that the Asian country’s economic growth might slow down to around 7.5%, which is generally in track with other analysts’ expectations. Last week, Goldman Sachs trimmed its GDP growth projection for China to 7.4%, down from 7.8%, while the 2014 forecast was cut to 7.7% from 8.4%.

Coppers other pricing factor, the strength of the dollar, will be determined tomorrow. Investors are keeping a close eye on Fridays Unemployment Rate and Change in Non-Farm Payrolls indicators, which will provide further information on the pace the U.S. economy is recovering at. Preliminary estimates suggest a 0.1% fall in the Unemployment Rate, 7.5% down from 7.6%. Non-Farm Payrolls are expected to stand at 165 000, down from 175 000 in May. If confirmed, Fed’s view to taper the bond purchasing program will be reinforced, thus pushing dollar-priced commodities down.