Copper reverses three days of declines on China optimism, Fed comments

Copper rose for the first time in four days after upbeat economic data from China and Europe fueled hopes for robust demand for the industrial metal. The metal also drew support after three Fed officials who vote on policy this year indicated the central bank will most likely refrain from scaling back its bond purchases this year. Investors eyed the highly anticipated upcoming non-farm payrolls and GDP data later in the week to gauge the metals demand prospects and speculate when the Federal Reserve will commence tapering.

On the Comex division of thew New York Mercantile Exchange, copper futures for settlement in December traded at $3.261 per pound at 10:01 GMT, up 0.23% on the day. Prices held in range between days high of $3.276 and low at $3.253 per pound, near yesterdays one-week low. The industrial metal lost nearly 1.2% on Monday, a third consecutive daily retreat but trimmed its weekly decline following Tuesdays rebound.

Copper drew support after China’s Vice Premier Zhang Gaoli said yesterday economic conditions are stable and that the country can meet its main economic targets this year. His statement comes after China’s National Bureau of Statistics reported on Sunday that the Asian nation’s 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.

Xiong Dabiao, an analyst at Minmetals Futures Co. in Shanghai, commented for Bloomberg: “Recent economic indicators and expectations for some reform from the upcoming Chinese Communist Party meeting improved market sentiment.”

Data from Europe showed yesterday that Spain’s manufacturing activity expanded in October with the nation’s manufacturing PMI having risen to 50.9 from 50.7 in September, slightly underperforming expectations for a rise to 51.0. Italy’s 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 country’s manufacturing PMI having declined to 49.1, trailing both expectations and the preceding month’s 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 zone’s manufacturing Purchasing Managers’ Index met projections to remain unchanged at 51.3, marking the fourth consecutive monthly expansion.

The metal also drew support after St. Louis Fed President James Bullard, one of Fed’s stimulus supporters, told CNBC television yesterday the central bank shouldn’t rush tapering its monthly bond purchases because of low inflation, which has been running well below policy makers’ 2% official target. Apart from him, two other Fed officials who vote on policy this year, Governor Jerome Powell and Boston Fed President Eric Rosengren, indicated yesterday the central bank may refrain from tapering for some time.