Copper futures rise on upbeat Japan data, Fed stimulus outlook weighs

Copper advanced for the first day in four after upbeat manufacturing, housing and inflation data from Japan boosted the metals demand prospects in the worlds third biggest economy. Speculations for an earlier-than-expected deceleration of Feds monetary easing program after a recent series of positive key data points limited gains.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in March traded at $3.215 per pound at 9:20 GMT, up 0.78% on the day. Prices shifted in a days range between $3.216 and $3.196 a pound. The industrial metal was unchanged on Thursday after falling for two days but trimmed its weekly decline to 0.2% on Friday.

Copper drew support after upbeat data from Japan suggested increased demand for the metal in the worlds third biggest economy. The Asian nations Manufacturing PMI, prepared by Nomura/JMMA and Markit Economics, rose for a fourth consecutive month and reached 55.1 in November, the highest in more than four years, after jumping to 54.2 in October. Japans manufacturing activity expanded (remained above the neutral level of 50) for a ninth consecutive month.

Business conditions improved sharply at Japanese manufacturers, led by strong demand in both domestic and foreign markets with growth in new export orders surging to 42-month high.

Claudia Tillbrooke, Economist at Markit and author of the report said: “Business conditions in the Japanese manufacturing economy improved for the ninth consecutive month and at a rapid pace in November, driven for the most part by an expansion of both foreign and domestic demand. New export orders, buoyed by the weak yen, hit a 42-month growth high in November. If the pace of this expansion is maintained into 2014, it may serve to compensate for the expected weakening of consumer demand following April’s scheduled consumer tax hike.”

Also fanning positive sentiment for the Japanese economy, consumer prices rose in October by a 1.1% annualized rate, meeting both projections and Septembers growth. Core Consumer Price Index, which excludes the volatile food and energy expenditures, also matched projections and jumped by 0.9%, exceeding the preceding months 0.7% advance.

Unemployment rate remained unchanged at 4.0% last month, mismatching projections to inch down to 3.9%.

Year-on-year, the Asian nations industrial output trailed expectations for a 6.3% growth but posted a moderate 4.7% advance after gaining 5.1% in September. Month-on-month, industrial production rose by 0.5%, compared to forecasts for a jump by 2.0% following the preceding periods 1.3% gain.

Upbeat housing data however offset the worse-than-expected industrial activity numbers. A gauge measuring investment activity in Japans housing sector marked a better-than-projected reading, supporting demand prospects for the industrial metal used as a conductor and building material. Year-on-year, housing starts rose by 7.1% in October after they jumped by 19.4% a month earlier, beating forecasts for a 5.0% advance.

Better-than-expected housing data from Britain also gave prices a lift. The Nationwide House Price Index (HPI) met expectations and jumped by 0.6% in October after posting at 1.0% in September. Year-on-year, prices of homes with mortgages backed by Nationwide rose by 6.5%, outperforming both projections and the preceding months gains of 6.2% and 5.8% respectively.

Fed stimulus outlook

Gains however remained limited after a recent series of better-than-anticipated U.S. key economic data spurred speculations for an earlier-than-expected deceleration of Feds quantitative easing program, despite brightening demand prospects.

The Labor Department reported that the number of Americans who filed for initial unemployment benefits fell by 10 000 to a two-month low of 316 000 in the week ended November 23, defying analysts’ projections for an increase to 330 000. Applications for the previous week were revised up by 3 000 after being initially estimated at 323 000.

A private report showed rising consumer confidence, backing the case for an earlier-than-expected Fed tapering. The Thomson Reuters/University of Michigan final index of consumer sentiment jumped to 75.1 in November after plunging to an eight-month low of 72.0 in October. Analysts expected a moderate rebound to 73.5.

Preliminary estimates for a widening global surplus in 2014 also weighed on prices. According to Barclays Plc and the International Copper Study Group, supplies are expected to exceed consumption next year, resulting in a glut that may almost triple to a 13-year high of 272 000 tons.

Data by the International Copper Study Group showed the global market for refined copper swung to a surplus of 21 000 tons in August due to higher output after running at a deficit for three months.