Copper fluctuates on Fed stimulus outlook, manufacturing data

Copper swung between gains and losses on Monday as market players weighed speculations the Federal Reserve might pare its bond purchases earlier than projected against overall upbeat manufacturing data from the Euro zone. A report by Chinas National Bureau of Statistics showing the Asian nations service sector expanded at the fastest pace since August 2012 also supported the industrial metals demand prospects.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December traded at $3.274 per pound at 10:06 GMT, down 0.73% on the day. Prices shifted in a days range between $3.308 and $3.270 per pound, the lowest since October 29. The industrial metal fell by less than 0.1% on Friday but settled the week nearly 1% higher.

Copper traded sideways after a recent string of upbeat U.S. data fueled speculations the Federal Reserve might pare its monetary easing program earlier than expected, which sent the dollar soaring to multi-week highs.

Despite refraining from tapering Feds stimulus in October, policy makers noted last week there were signs of “underlying strength” in the economy and kept a tone which left the 16-day government shutdown in October and the possibility for a U.S. debt default on the sidelines, shifting focus to upcoming key data points. According to a Bloomberg survey of 40 analysts conducted on October 17-18, the Fed will begin scaling back its bond purchases in March. However, according to Citigroup, the odds for tapering in January rose to 45% from 25% following FOMC’s after-meeting statement.

Federal Reserve Bank of Dallas President Richard Fisher, one of the central banks quantitative easing program opponents, said today in Sydney that the Federal Reserve should put an end to its bond purchases as soon as possible. Fisher said he wouldnt rule out backing a deceleration of the program by March, depending on the economic conditions.

“I would say in terms of my own support, that I wouldn’t rule out my supporting doing something before March. It’s really a question of what the circumstances are at the time and how the financial markets, and most importantly, the real economy is doing, ” Fisher said.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major peers, traded at 80.70 at 9:07 GMT, down 0.13% on the day. The December contract rose to a session high of 81.01, the strongest reading since September 17, while day’s low stood at 80.68. The U.S. currency gauge rose for a sixth straight day on Friday and settled the week 1.9% higher. Strengthening of the greenback makes dollar-denominated commodities more expensive for holders of other currencies and limits their appeal as an alternative investment.

China, Europe data

The metal however drew support as upbeat data from China and Europe supported the industrial metals demand prospects. Chinas National Bureau of Statistics reported on Sunday that the Asian nations non-manufacturing PMI rose to 56.3 in October from 55.4 in September, suggesting the world’s second-largest economy will likely meet the government’s goal for a 7.5% economic growth this year.

This comes after the government agency reported last week that the Asian country’s manufacturing Purchasing Managers’ Index (PMI) rose to a 18-month high of 51.4 in October from 51.1 in September, beating analysts’ predictions for a surge to 51.2.

A separate private report by Markit Economics and HSBC showed China’s manufacturing sector expanded at a faster pace than the preceding month and matched a preliminary reading. The HSBC China Manufacturing PMI surged to 50.9 last month, beating September’s 50.2.

Meanwhile in Europe, Spains manufacturing activity expanded in October with the nations manufacturing PMI having risen to 50.9 from 50.7 in September, slightly underperforming expectations for a rise to 51.0. Italys manufacturing expansion inched down to 50.7 from from 50.8 a month earlier, mismatching projections for a surge to 51.0. In France, activity disappointed by contracting further below the neutral level with the countrys manufacturing PMI having declined to 49.1, trailing both expectations and the preceding months reading of 49.4.

In Germany however, manufacturing activity rose to 51.7 in October from 51.5 a month earlier, beating projections to remain flat. The Euro zones manufacturing Purchasing Managers Index met projections to remain unchanged at 51.3, marking the fourth consecutive monthly expansion.