Copper on a 7-week high as European manufacturing accelerates

Copper continued to advance after erasing prior daily losses in early European trading and reached its strongest level since June 10 as positive economic data showed European manufacturing expanded more than expected, easing global demand concern following Chinas flash HSBC/Markit PMI fell to the lowest in 11 months.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at $3.222 a pound at 11:53 GMT, up 0.76% on the day. Prices ranged between days low at $3.165 and high of $3.233. The industrial metal is marking a fourth day of gains, extending current weeks advance to over 2.5% after closing 0.24% lower the previous one.

The industrial metal plunged during the Asian and early European session as another batch of negative China data spurred concern over commodities demand in the world’s second biggest economy. Copper’s demand prospects were hurt as the country’s vast manufacturing sector decelerated to an 11-month low in July according to the flash HSBC/Markit PMI. The index fell to 47.7, compared to June’s final reading of 48.2 and if confirmed in the final report on August 1, it will be the lowest in 11 months. Readings below 50 indicate contraction in the respective sector.

Meanwhile, a sub-index that measures employment fell for a fourth consecutive month below 50 to 47.3 in July, below June’s 47.7 reading and the the weakest since March 2009. Both negative and positive data about the state of the Chinese economy have a strong influence on copper pricing as the Asian country accounts for 40% of global consumption in 2012.

However, concerns over demand in China were offset by unexpectedly upbeat manufacturing data from the Euro zone. Frances Advance Manufacturing PMI for July rose to 49.8, up from Junes final reading of 48.4 and exceeding expectations for an increase to 48.8. Meanwhile, Germanys Advance Manufacturing PMI surged above the neutral level to 50.3, compared to projections for a rise to 49.2 from Junes final figure of 48.6. The Euro zones Advance Manufacturing PMI also surprised with an unexpected gain to 50.1, well above the preceding months 48.8 and anticipations for a jump to 49.1.

The industrial metal was also supported amid speculation that China’s government might take steps towards boosting growth in the world’s second biggest economy. On Tuesday, Chinese news organizations reported that Premier Li Keqiang’s cabinet will not tolerate an economic slowdown below 7%, causing China stocks to gain. The prime minister said before the State Council last week that a reasonable 7.5% growth target was set with labor market stability being the main goal. The Asian country accounts for 40% of global copper consumption.

Meanwhile, market players are keeping eyes on upcoming key U.S. economic data in order to further gauge the recovery pace of the worlds biggest economy. The Markit Flash U.S. Manufacturing PMI is expected to show an increase to 52.6 from Junes final reading of 51.9. New Home Sales is due to be released at 14:00 GMT. The indicator will likely show housing sales have surged to 0.484 million in June compared to 0.476 million in June. On Thursday, Durable Goods Orders for June should show a decrease to 1.1% from a revised 3.7% in May. Initial Jobless Claims are expected to have surged to 340 000 in the week ending July 19, up from the preceding periods 334 000.