Copper falls with QE outlook in focus, despite positive China data

Copper fell for the first time in three days on Tuesday as market players weighed the possibility for Fed tapering its monetary stimulus this month against prospects for increased demand in China following the recent upbeat data. Uncertainty over what actions the U.S. will take against Syria also left market players ambivalent about their expectations.

On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at $3.262 per pound at 9:57 GMT, down 0.49% on the day. Prices held in range between days high and low of $3.285 and $3.253 per pound respectively. The industrial metal rose by 0.4% on Monday, a third straight daily gain, but almost erased its weekly advance following Tuesdays retreat.

Copper fell on Tuesday amid broad expectations that the Federal Reserve will begin paring its monetary easing program this month. According to a Bloomberg survey of 34 analysts conducted last Friday, the Fed is expected to announce the reduction of its $85 billion per month bond purchasing program by $10 billion at the Federal Open Market Committee’s meeting, due on September 17-18. Despite the downbeat employment data last Friday, overall positive sentiment for the U.S. economys recovery pace remained.

Copper was also pressured as market players did not feel confident about holding their positions with the upcoming events in the U.S. regarding Syria. President Barack Obama said in an interview with NBC News that Russia’s offer to help put Syria’s chemical arsenal under international control was a “potentially positive development” and added that he is not sure of getting congressional support for military action against the Middle Eastern country.

Obama will make his case for U.S. action against Syria in a televised address today at 9:00 PM and is due to speak to lawmakers during the day. Despite the recent steps that were made toward a peaceful resolution of the conflict between the U.S. and Russia and Syria, the Senate is still expected to vote in favor or against the intervention by the end of the week. However the passage in the House of Representatives may be tough as Obama hasn’t won the support of many key figures.

Xiong Dabiao, an analyst at Minmetals Futures Co. in Shanghai, said for Bloomberg: “Investors are hesitant to hold their positions because of the uncertainties in Syria and the Fed decision. Investors want timely profits at the moment, which could make the prices volatile.”

Losses however remained limited as another batch of upbeat economic data from China boosted the industrial metals demand prospects. The Asian country’s industrial output rose more than expected. China’s industrial production surged by 10.4% in August, exceeding analysts’ projection for a 9.9% rise and the preceding month’s 9.7% expansion. These are positive numbers for the metal as it is widely used in Chinas vast manufacturing sector and the country accounts for around 40% of global consumption.

Meanwhile, the Chinese National Bureau of Statistics reported that Chinese Retail Sales surpassed both economists’ expectations and the previous month’s increase of 13.2% and rose by 13.4%.

Data showed yesterday the country’s total exports surged 7.2% last month, exceeding analysts’ expectations for a 5.5% gain. Imports increased by 7%, below projections, but still above July’s 5.1% rise. China’s trade surplus widened to $28.6 billion from $17.8 billion in July, surpassing expectations for a rise to $20.0 billion.

Meanwhile, the Chinese National Bureau of Statistics reported that consumer inflation rose by 2.6% and remained below the government’s target, leaving extra room for mini financial stimulus, which could provide ground for sustainable growth. China’s producer-price index fell by 1.6% in August after dropping 2.3% in July, marking the smallest decline in six months.