Copper falls on U.S. uncertainty

Copper retreated on Thursday despite a last-minute deal on raising the U.S. borrowing authority on concern over the damage dealt to the economy and ahead of a backlog of key U.S. economic indicators. Expectations for waning Chinese demand during the winter further pressured the market.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December fell by 0.70% to $3.285 per pound at 14:57 GMT. Prices held in range between days high of $3.325, the highest since October 1, while days low stood at $3.271 per pound. The industrial metal rose by 0.5% on Wednesday but trimmed its weekly advance to 0.4% today.

Copper fell on Thursday despite the deal that U.S. lawmakers managed to strike as a last-minute effort to avert a U.S. debt default as market players remained cautious ahead of a backlog of delayed key economic data. Most analysts see the Federal Reserve refraining from scaling back its monetary easing program on concern that the 16-day government shutdown had hurt the fourth quarter economic growth due to significant lost output.

Also damaging the U.S. confidence, Dagong Global Credit Rating Co., a Chinese rating agency, lowered its U.S. credit rating to A- from A and maintained its negative outlook. Despite the agency hardly being followed outside of China, the downgrade triggered an instant fall of the U.S. dollar as other credit agencies also pointed out recently that the U.S. creditworthiness is not as good as it once was. Fitch Ratings warned earlier in the week that the U.S. AAA sovereign rating could be lowered and put it on negative watch. In August 2011, Standard & Poor’s lowered its U.S. rating to AA+ after prolonged debt limit discussions, such as the recently ended, almost shut the government.

Myrto Sokou, an analyst at broker Sucden Financial in London, said for CNBC: “On a day when you have a deal on the U.S. debt ceiling, you would expect a relief rally, but investors appear cautious about getting back into positions ahead of all the delayed U.S. economic data. Also, the fundamentals in the copper market are not supportive at the moment.”

Despite the better demand this year compared to 2012, market analysts expect consumption in China to slow during the winter. The Asian nation is the top consumer of the industrial metal and accounts for around 40% of global consumption.

Market players will be keeping a close watch on the release of key economic data from China on Friday. China’s National Bureau of Statistics will likely report that the country’s economy grew by 1.9% in the third quarter, up from 1.7% in the previous three months. The median forecast of 21 analysts surveyed by Reuters showed that year-on-year China’s economy has expanded by 7.8% in the third quarter, up from 7.5% in the previous period.

The national agency is also due to release the country’s retail sales which likely inched up to 13.5% in September from 13.4% in the preceding month. Industrial production is projected to have expanded by 10.1%, slightly below August’s 10.4% advance.