Copper and aluminum rose Friday on the London Metal Exchange ahead of key U.S. employment data, as positive surprises this week from global manufacturing data continued to boost investor sentiment and hopes for improved demand. At 0842 GMT, LME three-month copper, the flagship of the LME complex, traded 0.5% higher on the day at $7,036.25 a metric ton, while aluminum rose 0.2% to $1,816.50 a ton. The metals had initially traded lower as investors sold to take profits, following rallies in base metals during the previous session. That was short-lived as a stronger euro versus the U.S. dollar helped lift the appeal of the dollar-denominated metals for buyers holding euros. Positive sentiment toward base metals continued after European, U.S. and Chinese official manufacturing index readings Thursday came in better than expected, boosting hopes for better demand for industrial metals, which are used in construction and consumer products.
Investors’ focus Friday turned to the monthly U.S. nonfarm-payrolls report, due to be released at 1230 GMT. Economists polled by Dow Jones expect the U.S. economy to have added 183,000 jobs in July, down from 195,000 jobs added in June. Although upbeat economic data have helped support base metal prices by spurring hopes for robust demand, the employment data will also be scrutinized for clues about the longevity of the Federal Reserve’s economic stimulus. The Fed’s bond-purchase program has been a crucial pillar of support for base metals, and investors are concerned that as macroeconomic data improve, this may be tapered as early as September. Markets analysts at brokerage Alpari said the U.S. unemployment rate will also be of interest, given that the Fed has previously stipulated this should fall below 6.5% before it considers raising interest rates, and 7.5% before tapering begins.
Even so, said Alpari analysts, investors seemed to be more focused on signs of growth in the U.S. economy than the economic-stimulus measures. ”Investors appear completely unfazed by the prospect of Fed tapering in September and are instead buying on strong economic data,” they said. Some investors, however, sounded a more cautious note for base metals prospects over the longer term. Australia & New Zealand Banking Group said that commodities investors remain cautious on future demand from China as smaller Chinese companies struggle with tighter credit conditions. ”The base metals remain rangebound,” said FastMarkets head of research Will Adams. “We feel there is little reason to be bullish as most of the metals are in surplus and stocks are high.” Mr. Adams said he expects more sideways trading, since metals have already pulled back this year and the market is now consolidating, though he said that the path of least resistance is likely for prices to move lower if they break out of their range. In other LME base metals, zinc climbed 0.7% higher on the day to $1,867.75 a ton, nickel rose 0.4% to $13,950 a ton and lead gained 0.4% on the day to trade at $2,114.75 a ton. Tin traded lower on the day, down 0.2% at $20,900, as investors took profits following a multi-week price high Thursday.