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Copper advances on China economic expansion, set for first weekly advance in three

Copper-TubeCopper advanced on Friday and is headed for the first weekly advance in three after the Chinese National Bureau of Statistics reported that the Asian nations economy expanded at a faster pace in the third quarter from the previous three months, boosting the metals demand prospects.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December rose by 0.45% to $3.312 per pound at 8:52 GMT. Prices held in range between days high and low of $3.319 and $3.291 per pound respectively. The industrial metal fell by 0.7% on Thursday but extended its weekly advance to over 1.2% after Fridays rebound.

Copper edged higher after the Chinese National Bureau of Statistics reported that the world’s second biggest economy grew at a faster pace in the third quarter both on annual and quarterly basis, indicating prospects for steady demand. Year-on-year, China’s economy expanded by 7.8% in the in the third quarter, meeting analysts’ expectations and outperforming the previous period’s 7.5% advance. Quarter-on-quarter, the Asian nation’s GDP grew by 2.2% from 1.7% in the previous three months and exceeded analysts’ projections for a 1.9% expansion.

The agency also reported that China’s industrial production rose by 10.2% in September from a year earlier, an inch lower than August’s 10.4% growth but beating anticipations for a fall to 10.1%. China’s retail sales also inched down and rose by 13.3%, compared to expectations for a 13.5% rise from the preceding month’s 13.4% advance.

Data by the Chinese Customs administration showed last Saturday that the Asian countrys copper imports rose by 18% to 457 847 tons in September from a month earlier as lower prices boosted orders. This was the highest level since March 2012. Total inbound shipments surged to 1.26 million tons in the third quarter, 21.4% above the preceding period.

A weaker dollar also underpinned the market. The U.S. dollar index, which measures the greenback’s performance against six major counterparts, traded at 79.69 at 8:53 GMT, down 0.06% on the day. The December contract fell to a 8-1/2 month low of 79.66 and extended its weekly decline to 1%. The greenback tends to trade inversely to dollar-denominated raw materials as weakening of the dollar makes them cheaper for foreign currency holders and boosts their appeal as an alternative investment.

However, the metals long-term outlook continued to be seen by analysts as bearish as Chinas government seeks to shift economy growth form investment-driven to more consumption-based, resulting in a slower expansion.

Helen Lau, senior metals analyst at UOB Kay Hian Securities in Hong Kong, said for CNBC: “The strong GDP number implies solid and growing demand for copper. But I havent really changed my bearish view for 2014 and 2015 because we expect Chinas industrial production growth to slow as the growth becomes less investment-driven.”

Gains were also limited as market players remained wary ahead of the upcoming release of delayed U.S. data without clear view of how much damage the 16-day partial government shutdown caused to the fourth quarter economic growth. Certainty that the debt impasse scenario will repeat again in February will leave raw materials pressured to the downside.

U.S. lawmakers managed to reach an accord to raise the nation’s debt ceiling and end the 16-day government shutdown but the agreement was only a temporary measure and was seen as kicking the can down the road. The bill provided government funding until January 15 and extended the nation’s borrowing authority through February 7. There was however no resolution to lawmakers’ long-term divides on fiscal policy and no major policy changes sought earlier by Republicans were achieved.

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