Copper fluctuates on weaker Japan growth, China optimism

Copper swung between gains and losses on Monday as slower than expected Japan GDP growth spurred concern over demand in the worlds third biggest economy. Meanwhile, last weeks positive data from China laid support on the metal, boosting demand prospects in the worlds top consumer. Quantitative Easings outlook also remained in investors focus.

On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at $3.306 a pound at 11:37 GMT, marking a 0.01% daily loss. Prices ranged between days high at $3.329, the strongest level since June 7, and days low of $3.284 a pound. The industrial metal rose 1.46% on Friday, a fourth consecutive daily advance, and settled the week 4.48% higher.

Copper was pressured throughout the Asian session as a slower than expected GDP growth in Japan reduced demand outlook. The Japanese economy, the third biggest following the U.S. and China, grew by 0.6% in the second quarter according to a preliminary reading, underperforming expectations and the preceding quarters downward revised pace of 0.9%. Year-on-year, Japans Preliminary Gross Domestic Product gained 2.6%, once again below economists projections for a 3.6% surge and last years downward revised reading of 3.8% during the same quarter.

Park Jong Beom, a senior trader at Tong Yang Securities Inc. in Seoul, said for Bloomberg: “The weak Japan GDP number is weighing on the market. The data probably provided some investors with a good excuse to take profits after the recent rally.”

The red metal however rebounded as sentiment for a stabilizing Chinese economy supported prices. On Friday, China’s July Consumer Price Index remained steady with a 2.7% rise year-on-year, aligning with the previous month’s reading but underperforming expectations for a 2.8% rise. On a monthly basis, CPI met projections at a 0.1% increase. On an annual basis, China’s Producer Price Index (PPI) declined by 2.3%, above the anticipated 2.2% but outdoing the preceding period’s 2.7% fall. Meanwhile, China’s industrial production surpassed analysts’ expectations for a 9.0% surge and rose by 9.7% in July, the biggest climb this year, beating June’s 8.9% gain. This offset a bit worse than expected retail sales, which rose by 13.2% in July, below forecasts for a 13.5% surge and last month’s 13.3% gain.

On Thursday, the Chinese General Administration of Customs reported the country’s exports rose by 5.1% in July after contracting 3.1% in June. Expectations for a 3% climb were exceeded. Meanwhile, imports also surpassed analysts’ projections for a 2.1% jump and surged 10.9% last month following a 0.7% decline in June.

Market sentiment was also boosted as the Honk Kong daily newspaper South China Morning Post reported earlier that the government was offering financial stimulus to key cities and provinces in order to support economic growth. Last month, government officials said Beijing is ready to take measures to protect Chinas 7.5% economic growth target for the year.

Market players will be closely watching for the upcoming U.S. data to gauge the economy’s recovery pace and speculate whether the Federal Reserve will begin winding down its massive bond purchasing program. July’s Retail Sales are due on Tuesday and are expected to have advanced by 0.3%, compared to a 0.4% jump in the preceding month. Import prices are projected to have outdone the previous period both on annual and monthly basis. On Wednesday, producer prices (Producer Price Index) will likely show a slower advance than the preceding period both year-on-year and month-on-month. Thursday’s consumer inflation (CPI) should have advanced by 0.2% compared to June and 2.0% from a year earlier. Industrial Production is expected to have surged 0.3%, marking the same advance as in June. Both of Friday’s Building Permits and Housing Starts are projected to have advanced last month.