Copper at 10-week high on Fed outlook

Copper rose for a third straight day on Monday as investors weighed the possibility for Fed tapering its Quantitative Easing program in September following Fridays disappointing new homes sales. Market playerss focus shifted to the U.S. Durable Goods Sales due later today to gauge the U.S. economys recovery pace.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December traded at $3.380 per pound at 9:46 GMT, marking a 0.70% daily advance. Prices ranged between days high of $3.395 a pound, the highest since June 5, while days low was touched at $3.353 per pound. The industrial metal rose by 0.5% on Friday but settled the week 0.25% lower after gaining 6% in the preceding two five-day periods.

Copper extended gains from Friday when downbeat U.S. housing data dampened speculations that the Federal Reserve will begin decelerating its $85 billion bond purchasing program in September. The U.S. Commerce Department reported that 0.394 million new homes were sold in the U.S. in July, marking a 13.4% decline. This was the lowest level in nine months and the steepest drop in three years. New Homes Sales completely mismatched projections for a rise to 0.490 million units sold. At the same time, June’s reading received a downward revision to 0.455 million from the previous reading of 0.497 million homes.

This comes after St. Louis Federal Reserve Bank President James Bullard, one of Fed’s monetary stimulus supporters, said that the central bank should take time and assess the U.S. economy and inflation thoroughly before tapering the bond purchases. He commented for Reuters: “I don’t think we have to be in any hurry. Inflation is running low and we have got mixed data on the economy. We can afford to be very deliberate in our decision making.”.

Meanwhile, Atlanta Fed President Dennis Lockhart, also a Quantitative Easing supporter, said he will vote yes for decelerating the bond purchasing program if the economic data is supportive. He commented for Reuters: “I would be supportive in September as long as the data between now and then basically confirm the path we’re on. I am confident in a continuation of this sort of moderate growth path.”

The metal was supported last week amid signs of recovering manufacturing activity from the U.S. to China. On Thursday, the Chinese HSBC Manufacturing PMI, prepared by HSBC Holdings Plc and Markit Economics, surged to a four-month high of 50.1, signalling expansion that was based on a rebound in new orders. The figure outperformed analysts’ expectations for a surge to 48.3 from July’s final reading of 47.7, an 11-month low. The indicator added to promising reports for July’s factory output, retail sales and exports, providing positive signs that the world’s second biggest economy is stabilizing. Levels above 50 indicate expansion in the respective sector.

On Friday, Germany’s final second quarter GDP met expectations for a 0.7% surge, compared to the preceding quarter, which also had risen by 0.7%. The leading EU nation’s economy expanded by 0.5% year-on-year in the second quarter, matching anticipations and the preceding period’s 0.5% growth.

Meanwhile, Great Britain’s Q2 Preliminary Gross Domestic Product surpassed projections both on quarterly and annual basis. Quarter-on-quarter, Great Britain’s economy grew by 0.7%, 0.1% above expectations and the preceding three months’ advance. On an annual basis, United Kingdom’s GDP rose by 1.5%, 0.1% above projections and the previous period’s 1.4% advance.

Market players will be keeping a close eye on this week’s U.S. economic data to further gauge Quantitative Easing’s tapering prospects. On Monday, Durable Goods Orders are expected to have declined by 4% in July. Tuesday’s Consumer Confidence is projected to have fallen to 79.3 in August from 80.3 in the preceding month. The S&P/Case-Shiller Composite-20 Home Price Index might also post a decline. Wednesday’s Pending Home Sales might have advanced by 0.1%. On Thursday, the Preliminary Revised GDP is likely to have grown by 2.3%, while consumer spending and core consumer spending (Personal Consumption Expenditures) probably surged by 1.8% and 0.8% in the second quarter respectively. Initial Jobless Claims probably fell by 1 000 in the week ending August 24. On Friday, Personal Income and Spending are expected to have advanced in July but at a slower pace than in June. Core PCE on monthly and annual basis likely rose in July and the Chicago PMI and Final University of Michigan Confidence are projected to have advanced in August as well.