Copper near 3-1/2-month low on mixed Fed comments, Euro zone sentiment

Copper traded mostly lower on Tuesday after hitting a 3-1/2-month low following mixed comments by Fed officials implying a brightening outlook for the U.S. economy, which fueled speculations for an earlier-than projected stimulus tapering. Worse-than-expected economic sentiment in the Euro zone and the leading EU nation dampened demand prospects and pressured the euro, allowing the U.S. dollar to regain positions and pressure dollar-denominated commodities.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in December traded at $3.147 per pound at 10:10 GMT, down 0.09% on the day. Prices fell to a day low of $3.124, the weakest level since August 2, followed by a rebound to session high of $3.156 a pound. The industrial metal fell on Monday and extended its weekly decline to 0.8% on Tuesday.

The market was pressured on renewed concerns over an earlier-than-projected Fed stimulus tapering following mixed comments by senior officials on Monday. President of the Federal Reserve Bank of New York William Dudley, a supporter of Fed’s quantitative easing program, pointed to improving labor market and stronger-than-expected third quarter growth as signs of optimism for the U.S. economic recovery. He however said the signals aren’t enough to warrant stimulus reduction yet.

Meanwhile, Philadelphia Fed President Charles Plosser said the central bank needs to set a limit for the program and bring it to an end when the final size is reached. This comes after Fed Vice Chairwoman Janet Yellen pledged last week to maintain the central bank’s current bond purchasing pace, if appointed as Bernanke’s successor. According to a Bloomberg survey of 32 analysts conducted on November 8, the Federal Reserve will most likely leave its monetary stimulus intact until FOMC’s March 18-19 meeting.

Investors are now awaiting the release of FOMC’s October meeting protocols on Wednesday to further assess whether the Federal Reserve might scale back its massive bond buying program earlier than expected.

The metal was pressured on Monday after the National Association of Home Builders reported that its NAHB/Wells Fargo Housing Market Index remained unchanged at 54 in November after Octobers reading received a downward revision. The reading mismatched an expected rise to 55.0 according to a Bloomberg survey, curbing the industrial metals demand prospects.

Data by the U.S. Commodity Futures Trading Commission showed investors turned bearish on copper last week for the first time since September 17. Bearish bets exceeded wagers for price gains by 8 117 contracts in futures and options combined in the week ended November 12.

Also fanning negative sentiment, investor confidence in the Euro zone rose less than expected in November. The Zentrum für Europäische Wirtschaftsforschungs Economic Sentiment index rose to 60.2 from 59.1 in October, but trailed expectations for an advance to 63.1.

At the same time, the Euro zones ZEW Current Situation index declined to -61.6 from -60.9 a month earlier.

Data also showed that construction output in the single currency bloc contracted by 1.3% in September after rising by 0.5% a month earlier. Year-on-year, production fell by 0.2% after declining by 4.7% in August.

However, German investors confidence rose for a fourth month in November, indicating the leading EU economy remains stable even after a third quarter slowdown. Current conditions however remained overall downbeat.

Germanys ZEW Economic Sentiment index surged to 54.6 in November, up from 52.8 a month earlier and beating expectations for an advance to 54.0. Current economic conditions however disappointed by falling to 28.7, defying analysts projections for a rally to 30.9 from Octobers reading of 29.7.