Copper declines on Fed stimulus outlook, U.S. Budget talks

Copper fell for a third day amid ambivalent expectations for Feds tapering timetable following mixed comments from Federal Reserve officials. Political disagreement over the U.S. budget further damped sentiment.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December fell by 0.89% to $3.269 per pound at 8:41 GMT. Prices held in range between days high of $3.299 and a one-week low of $3.261 a pound. The industrial metal extended its weekly decline to over 1.1% after gaining 2.6% in the preceding five-day period.

Copper extended Mondays decline as market players remained cautious following mixed comments by different Fed officials regarding the central banks future moves. Yesterday, Federal Reserve Bank of New York President and vice chairman of the FOMC William Dudley said that policy makers must forcefully push against headwinds.

“The economy still needs the support of a very accommodative monetary policy,” Dudley said. “Improving economic fundamentals versus fiscal drag and somewhat tighter financial conditions are pulling the economy in opposite directions, roughly canceling each other.”

Meanwhile, Atlanta Fed President Dennis Lockhart said that monetary policy should focus on creating a more dynamic economy. He also backed Fed’s bond purchasing program.

This comes after St. Louis Fed President James Bullard said on Friday that the Federal Reserve could still trim its monetary easing program in October if economic data lay support. “October is a live meeting,” he said for Bloomberg. “I’m not saying it’s going to happen, but the possibility exists.”

At the same time, political conflict between Democrats and Republicans over funding and debt limit after Feds surprising decision last week to leave its bond buying program intact further dimmed sentiment.

Tetsu Emori, the chief fund manager at Astmax Asset Management Inc., said for Bloomberg: “Concern over the U.S. fiscal situation has damped market sentiment amid a lack of fresh buying incentive before next week’s Chinese holidays.”

Market players will be keeping a close eye on this weeks upcoming U.S. data to further gauge the strength of the U.S. economy and tapering prospects for October. Data today may show that the U.S. consumer confidence has fallen in September to 80.0 from 81.5 in August. Meanwhile, the S&P/Case-Shiller Composite-20 Home Price Index has likely gained to 12.40% in July from 12.07% in the preceding month, sighting consistent recovery of the housing market. On Wednesday, August’s Durable Goods Orders are projected to have declined by a mere 0.1% after plunging 7.4% in July, while New Homes Sales rose to 0.425 million from 0.394 million in the previous period.

On Thursday, the final reading of the Q2 Gross Domestic Product is expected to show a 2.7% expansion from the previous year after the preliminary revised reading showed a 2.5% growth. Final consumer spending (Personal Consumption Expenditures – PCE) likely grew by 1.8% in the second quarter, while the core value surged 0.8%. Also on Thursday, weekly initial jobless claims data is expected to show an increase to 330 000 from 309 000 claims filed in the preceding week, while pending homes sales may have decreased by 1% in August after falling 1.3% in July.