Copper slightly up on China data

Copper advanced on Monday as a stabilizing services sector in worlds top consumer China defied the countrys economic slowdown as new business orders recovered from a multi-year low. A separate private survey showed services PMI remained unchanged from June, above the neutral level.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at $3.173 a pound at 8:37 GMT, up 0.01% on the day. Prices ranged between days high and low of $3.189 and $3.149 a pound respectively. The industrial metal surged 0.09% on Friday and ended the week 2.05% amid positive industry data from the U.S., Europe and China.

Copper continued to advance on Monday as Chinas services sector expanded in July despite the countrys cooling economy. On Saturday, an official survey showed China’s non-manufacturing industry accelerated mainly due to increased positive sentiment from small companies. The government’s non-manufacturing PMI rose to 54.1 last month from June’s 53.9.

Meanwhile, a separate private survey showed China’s services industry state remained unchanged in July, but still above the neutral level. The HSBC/Markit Purchasing Managers’ Index for the non-manufacturing sector stood at 51.3 in July, unchanged from June and above April’s 20-month low of 51.1. However, expansion was limited by a fall in prices that companies charged for their services as demand was too weak to raise prices, while inflation kept increasing costs.

Steve Wang, Hong Kong-based chief China economist with Reorient Financial Markets Ltd., said for Bloomberg: “The PMI is supposed to be a leading indicator so we are witnessing a stabilization and a sign the economy isn’t slowing down at a faster rate. A lot of economy-boosting measures have been put in place since the beginning of the year and there’s a time lag for those to kick in, so we should see a bit of a rebound in the fourth quarter.”

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said: “China’s service sector has stabilised at a relatively low level of growth. But the profit margin continued to be squeezed given the divergence between input prices and prices charged indices. Without a sustained improvement of demand, services growth is likely to remain lackluster, putting downside pressures to employment growth.”

Last week, the industrial metal was supported and erased earlier weekly as unexpectedly upbeat China manufacturing data beat analysts’ expectations. China’s National Bureau of Statistics reported better-than-expected growth in factory activity. The Asian nation’s Purchasing Managers’ Index (PMI) rose to 50.3 last month, surpassing projections for a drop to 49.8 from June’s reading of 50.1. This was acknowledged as a positive sign for copper in the short-term, but analysts still expect contracting demand due to slowing growth as the Chinese government is trying to reshape the country’s economy.

Copper was also supported as the FOMC said in its after-meeting statement last week that Fed will keep its Quantitative Easing program intact as it sees risks of disinflation. This will benefit dollar-denominated commodities as they trade inversely to the dollar and ongoing monetary easing programs make a currency cheaper.

The dollar index, which measures the greenbacks performance against six major counterparts, swung between gains and losses last week amid controversial U.S. data and settled the week 0.3% higher after trimming previous weekly gains. On Monday, the U.S. currency gauge traded at 81.87 at 8:37 GMT, down 0.17% on the day. Day’s high stood at 82.00.