Copper falls on China trading error, QE uncertainty

Copper fell on Monday, snapping ten straight days of gains, as a round of profit taking following Fridays three-month high kicked in. Meanwhile, a trading error at Everbright Securities Co. on August 16 reduced investor confidence in Chinas stock market while uncertainty over Feds moves regarding its bond purchasing program left market players ambivalent following last weeks controversial U.S. data.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in September fell by 0.36% to $3.351 per pound at 9:26 GMT, snapping ten straight days of gains. Prices held in range between days high and low of $3.373 and $3.343 per pound respectively. The industrial metal rose 0.13% on Friday and settled the week 1.56% higher after surging 6.5% the preceding two five-day periods.

Copper retreated on Monday on speculation that a trading error last Friday by Everbright Securities will further erode confidence in Chinas stock market. The error caused a 53% surge in volumes traded and a fluctuation of more than 6% in the Shanghai Composite Index. It surged from a loss of 1% to a gain of 5.6% within two minutes in the morning session, followed by a reverse to a 0.6% decline in the end of the day.

Everbright Securities, Chinas ninth-largest brokerage, said it may face a penalty by regulators with the China Securities Regulatory Commission saying in a statement it will investigate the case. The regulator said that no human operational errors were detected at the company at August 6.

Lin Hui, head of research department at Orient Futures Co. in Shanghai, said for Bloomberg: “Friday’s trading error hurt market confidence. Metals are a bit weak today given the lack of momentum and unclear economic outlook in China, the U.S. and other parts of the world.”

Copper was supported last week as U.S. data showed the worlds biggest economy is expanding, despite the slow pace. The U.S. Department of Labor reported on Thursday that the preceding week’s Initial Jobless Claims declined to 320 000, the lowest since October 2007. This outperformed analysts’ expectations for a rise to 335 000 and was well below the preceding week’s upward revised reading of 335 000 from 333 000 people.

Meanwhile, manufacturing in the New York region expanded in August for a third month. The New York Empire Manufacturing Index for August stood at 8.24 but underperformed expectations for an advance to 10.00 from July’s reading of 9.46.

Market players will be keeping a close watch on the upcoming U.S. data to further gauge the strength of the U.S. economy. On Wednesday, Existing Home Sales in July are expected to have risen to 5.13 million on Wednesday, up from June’s 5.08 million. On Thursday, last week’s Initial Jobless Claims likely rose by 10 000 to 330 000, while the Markit Flash U.S. Manufacturing PMI for August is projected to have advanced to 54.0 from July’s 53.7. On Friday, July’s New Home Sales are expected to have declined to 0.490 million houses sold, down from 0.497 million in the preceding month.