Copper futures fall on Fed stimulus outlook, China party meeting in focus

Copper fell on Tuesday as market players weighed recent upbeat data from the U.S. and China against speculations the Federal Reserve might commence scaling back its monthly bond purchases earlier than expected. Investors also awaited the outcome of a four-day meeting of Chinas Communist Party where leaders were set to draft a reform blueprint for the next decade.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in December fell by 0.47% to $3.244 per pound by 9:29 GMT. Prices shifted in a days range between $3.258 and $3.241 per pound respectively. The industrial metal marked a minor decline on Monday and extended its weekly retreat to over 0.4% on Tuesday.

Copper continued to fall as a stronger greenback weighed on dollar-denominated commodities. The U.S. currency was boosted by speculations the Federal Reserve may begin trimming its monetary easing program earlier than previously projected following a recent string of upbeat U.S. data. The Labor Department reported on Friday that U.S. job growth unexpectedly accelerated in October from a month earlier, signaling U.S. employers overall ignored the 16-day government shutdown last month and remained optimistic over the nation’s economic recovery. U.S. non-farm payrolls surged by 204 000 in October, exceeding the median estimate of 91 economists surveyed by Bloomberg for a 120 000 advance.

Also supporting the case for Fed tapering, a preliminary reading showed on Thursday the U.S. economy expanded at a much faster pace in the third quarter than previously expected and exceeded the previous three months’ growth. Data by the Commerce Department showed U.S. GDP (Gross Domestic Product) growth surged 2.8% in the three months trough September, the most in a year, defying analysts’ projections for a drop to 2% from the preceding quarter’s 2.5% expansion.

The U.S. dollar index, which measures the greenback’s performance against a basket of six major counterparts, traded at 81.45 at 9:29 GMT, up 0.37% on the day. Prices shifted in a day’s range between 81.48 and 81.14. The December contract fell by 0.2% on Monday but rose back to positive weekly territory following Tuesday’s rebound, up 0.2%. The U.S. currency gauge surged to a 1-1/2-month high of 81.57 on Friday after the release of the U.S. employment data. Strengthening of the greenback makes dollar-priced commodities more expensive for foreign currency holders and limits their appeal as an alternative investment.

China data, reform agenda

Coppers losses were however limited after upbeat readings from China on Friday and Saturday boosted the industrial metals demand prospects in its number one consumer. According to China’s National Bureau of Statistics, consumer inflation jumped by an annualized 3.2% last month, slightly up from September’s 3.1% advance. Despite trailing the median estimate of analysts surveyed by both Reuters and Bloomberg for a 3.3% surge, last month’s reading matched February’s 10-month high.

The Asian nation’s industrial production surprisingly expanded by 10.3% last month, defying analysts’ projections that factory output growth will decelerate to 10.0% after it jumped 10.2% a month earlier.

Meanwhile, retail sales rose by 13.3% in October, the same as in September, but trailed expectations for a 13.4% advance. Fixed-asset investment, a key driver for economic growth, matched expectations for a jump by 20.1% in the ten months through October, but were slightly lower than last year’s 20.2% increase during the comparable period.

Also fanning positive sentiment, China’s General Administration of Customs said on Friday the Asian nation’s exports rebounded above expectations in October after declining in September. Stronger global demand sent overseas shipments soaring by 5.6% last month, exceeding analysts’ projections for a surge of 3.2% from the previous month’s 0.3% decline.

Inbound shipments rose at a slower-than-expected pace but still marked a healthy expansion. The Asian country’s imports rose by 7.6% in October, underperforming expectations for an advance of 8.5% but still marked an improvement from September’s 7.4% gain. The upbeat exports reading widened the nation’s trade balance surplus to $31.10 billion, compared to projections for a rebound to $23.90 billion from the preceding period’s plunge to $15.20 billion.

Investors also looked ahead at the conclusion of a four-day meeting of China’s Communist Party. Chinese leaders, including President Xi Jinping and Premier Li Keqiang, sat down on Saturday to set a reform agenda for the next decade. China’s government pledged to run tough economic reforms in order to make economic growth less dependable on foreign investment and shift it to domestic consumption-based.

Analysts expect the announcement of economic reforms, which will preserve stability and reinforce the Communist Party’s power. Though not directly linked to copper pricing, those reforms will show how committed China’s government is to reform the world’s second biggest economy, the industrial metals top consumer.