July 30, 2013
Copper steadied after hitting a near three-week low on Monday on concerns about top consumer China’s economy, with expectations the Federal Reserve will reaffirm its pledge to keep US interest rates near zero underpinning prices. Three-month copper on the London Metal Exchange fell to its lowest since July 10 at $6,820 a tonne in intraday trade. It recovered to end at $6,878 a tonne, up from a last bid of $6,860 on Friday.
The metal is headed for a small monthly gain of over 1 percent for July following losses of nearly 8 percent in June. Investors are watching for official data this week from China gauging activity in its manufacturing sector. Last week an initial reading from HSBC showed factory activity in July at its slowest in 11 months. China accounts for some 40 percent of global copper demand. “The bigger moves over the next couple of months will probably be on the downside. There is a risk of Chinese imports falling off again and we have a lot of new supply set to enter the market,” said Gayle Berry, an analyst at Barclays.
“There is still a small chance of a break higher in copper because the market is very short and the fundamental copper data is better than people realise,” she added. Helping support copper prices was the dollar’s fall to a five-week low against a basket of currencies on expectations the US Federal Reserve intends to keep interest rates low for some time. The Fed starts a two-day meeting on Tuesday. A weaker dollar makes dollar-priced metals cheaper for European and other non-US investors.
Earlier, US data showed pending home sales fell in June from a near six-year high in May. Markets are focused, however, on US payrolls data that will be released on Friday. The forecast is for 185,000 jobs to have been added in July and a dip in the jobless rate to 7.5 percent. A strong report would support the case for the Fed to start rolling back stimulus. Although most economists are eyeing a September start to stimulus withdrawal, most have scaled back views of any aggressive changes.
“Given the recent run of economic data, there seems little risk of the Fed suggesting that it will be any more aggressive on tapering than current market expectations,” Ric Spooner, chief market analyst CMC Markets in Sydney, said in a note. “The risk is all the other way, with potential for the Fed to emphasise that it won’t reduce its asset-buying program unless unemployment continues to fall.”
Also underpinning copper, Rio Tinto has put on hold a more than $5 billion underground expansion of its giant Oyu Tolgoi copper mine in Mongolia, after the government said parliament needed to approve the project’s financing. In other metals traded, aluminium ended at $1,798 a tonne from $1,794, zinc ended at $1,846 a tonne from $1,855, lead ended at $2,065 a tonne from $2,050, tin ended at $19,925 a tonne from $19,450, while nickel ended at $13,700 a tonne from $13,850. Courtesy:Reuters
Published in ZaraiMedia.com