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Copper up 2% on upbeat China data

copperCopper snapped four consecutive days of declines on Monday as Chinas manufacturing sector expanded at the fastest rate since April last year. A separate private survey by HSBC and Markit Economic signaled expansion following Julys 11-month low. Euro zone data also pushed prices up.

On the Comex division of thew New York Mercantile Exchange, copper futures for delivery in December rose by 1.77% to $3.290 a pound at 8:56 GMT. The industrial metal surged by 2.39% earlier in the session to a days high of $3.310 per pound, while days low stood at $3.246 per pound. The contract fell by 0.44% on Friday, a fourth daily decline in a row, and settled the week 3.4% lower after shedding 0.25% in the preceding one.

Copper regained positions on Monday as data showed a stabilization in Chinas economic activity, which boosted the industrial metals demand prospects as it is widely used in the Asian countrys vast industrial sector. China is the biggest consumer and accounts for around 40% of global consumption.

The Chinese National Bureau of Statistics reported on Sunday that the country’s manufacturing Purchasing Managers’ Index surpassed forecasts for a jump to 50.6 according to a Reuters poll and rose to 51.0 in August, the highest since last April, from 50.3 in July.

Meanwhile, according to a separate private survey by HSBC and Markit Economics, the HSBC Purchasing Managers’ Index posted a surge to 50.1 in August, marking a major improvement from July’s 11-month low of 47.7 in July and ending a three-month declining cycle. Chinese manufacturers signaled a slight expansion in growth that was based on improving market conditions.

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said: “The final reading of August’s HSBC China Manufacturing PMI recovered to 50.1, from an 11-month low of 47.7 in July. This implies that growth in China’s manufacturing sector has started to stabilize on the back of a modest rebound of new orders and output. This was mainly driven by the initial filtering through of recent stimulus measures and companies’ restocking activities. We expect some upside surprises to China’s growth in the coming months.”

The industrial metal also drew support by positive manufacturing data from Europe. Both Sweden and Norways manufacturing PMI rose more than projected to 52.2 and 53.0 respectively. Spains manufacturing sector marked an expansion for the first time in two years and surged to 51.1 in August from 49.8 in July, outperforming analystss projections for a reading of 50.1. Frances manufacturing sector marked an expected contraction as the countrys PMI remained flat at 49.7, meeting projections. Germany and Switzerlands indicators remained in the expansion zone but posted a retreat from the preceding month, falling to 51.8 and 54.6 in August from 52.0 and 57.4 in July respectively.

However, Great Britains Manufacturing CIPS rallied to 57.2, the highest since 2 1/2 years, surpassing expectations for a surge to 55.0. This was the biggest advance in nineteen years. Julys reading was revised upward to 54.8 from an initial reading of 54.6.

The general Euro zones Final Manufacturing PMI surpassed analysts expectations for remaining unchanged at 51.3 and rose to 51.4, indicating the the single currency blocs economic activity is consistently improving.

Market players will be keeping a close watch on this weeks key U.S. data to gauge the American economys strength and look for a possible date when the Fed may begin tapering its Quantitative Easing program. On Tuesday, the ISM Manufacturing index is expected to have fallen in August, while the Markit U.S. Manufacturing PMI should have remained flat. On Wednesday, the U.S. trade deficit is projected to have widened to $38.6 billion in July from $32.224 billion in June. Thursdays ADP Employment Change will provide preliminary information for the U.S. labor market. Also on Thursday, Q2 Non-Farm Productivity and Unit Labor Costs should have increased, while the ISM Non-Manufacturing Composite and Factory Orders are expected to have declined. On Friday, the U.S. Non-Farm Payrolls should have surged in August, while the Unemployment Rate likely remained unchanged at 7.4%. Average Hourly Earnings and Average Weekly Hours are anticipated to have increased as well.

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