Euro zone PMIs, new orders undershoot expectations
* China copper demand growth seen falling to 6.4 percent in
* Coming up: FOMC rate decision and briefing from 1630 GMT
By Melanie Burton
LONDON, Nov 2 (Reuters) – Copper rallied on Wednesday as a weaker dollar prompted buying after two days of losses and as supply constraints boosted risk appetite, offsetting worries about a disorderly Greek default.
Benchmark copper on the London Metal Exchange was untraded in official rings, but bid at $7,925, up more than two percent from $7,730 a tonne on Tuesday when it fell by more than three percent. The metal rallied by a quarter last month from a 2011 trough of $6,635 to peak above $8,200 a tonne last week. Copper has ricocheted more violently than other commodities because of its high correlation to the economic cycle and is responding to uncertainty over the global economic outlook, said BNP Paribas analyst Stephen Briggs. “As sentiment ebbs and flows about economic prospects you would expect them (industrial metals) to be the most exposed to swings in sentiment,” he said, noting worsening in European manufacturing sentiment data on Wednesday. “The new orders element showed a sharp further deterioration so it is a concern…(but) the rally overnight is just the market deciding that yesterday’s story about Greece wasn’t quite as bad as first feared because of the intricate politics this involves.”
Worries about the Euro zone debt situation remained in place as Greece’s Prime Minister George Papandreou won the backing of his cabinet on Wednesday to hold a referendum on a 130 billion euro bailout package, a decision that had sent markets into a tailspin in the previous session. A string of manufacturing reports this week however, have on balance underpinned copper’s demand prospects.
On China, the closely watched HSBC flash PMI new orders report suggested improvement in small and medium enterprises while a similar report from the US showed slowing growth but also a pickup in new orders.
World stocks and the euro edged up on Wednesday after a rollercoaster week, as investors hoped for comfort on the weak U.S. economy and troubled euro zone from meetings of the U.S. Federal Reserve and Group of Twenty leaders. Earlier, data showed the European downturn in euro zone manufacturing in October was even deeper than previously reported, according to business surveys showing how severely the currency union’s debt crisis has choked new factory orders. Also underpinning copper was a rebound in the euro against the dollar, and options expiry for the LME’s November copper contract. A weaker U.S. currency makes dollar-based commodities cheaper for holders of other currencies.
Buoying risk appetite, U.S. jobs data struck a cheerier note ahead of October’s key non-farm payrolls report, as private employers added more jobs than expected in October.
Demand for refined metal in top copper consumer China is expected to grow 6.4 percent in 2012, a slow down from this year’s 8.5 percent growth rate, a senior analyst at state-backed research firm Antaike said on Wednesday. Real consumption of refined copper may rise to 7.85 million tonnes in 2012, from 7.38 million tonnes expected in this year, Yang Changhua said. China is the world’s largest consumer of base metals, accounting for almost 40 percent of copper demand last year. “China’s demand may be somewhat weaker in 2012 but it will sustain global demand for commodities,” said Caroline Bain, commodities analyst with Economist Intelligence Unit (EIU) EIU expect China to begin relaxing monetary policy early next year. “China is believed to have run down stocks of base metals in 2011, which coupled with markedly lower global prices, could spark a rush of Chinese buying in early 2012,” she said in a note.
Also supporting copper prices was another draw from LME-registered stocks and ongoing strikes at Freeport-McMoRan Copper & Gold Inc operations in Indonesia and Peru. Copper stocks have dropped around ten percent in the last month. Across other metals, battery material lead was at $1,997 a tonne in rings from $1,982 and aluminium was at $2,124.50 from $2,111. Nickel was untraded but bid at $18,675 from $18,700. Tin was bid at $21,600 from a bid of $21,750 while zinc , used in galvanizing traded at $1,921 from $1,913 on Tuesday’s close.
Metal Prices at 1316 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2009 Ytd Pct move
COMEX Cu 358.80 8.55 +2.44 334.65 7.22
LME Alum 2124.00 13.00 +0.62 2230.00 -4.75
LME Cu 7925.00 195.00 +2.52 7375.00 7.46
LME Lead 1997.00 15.00 +0.76 2432.00 -17.89
LME Nickel 18675.00 75.00 +0.40 18525.00 0.81
LME Tin 21600.00 -400.00 -1.82 16950.00 27.43
LME Zinc 1921.50 8.50 +0.44 2560.00 -24.94
SHFE Alu 16285.00 -55.00 -0.34 17160.00 -5.10
SHFE Cu* 58670.00 960.00 +1.66 59900.00 -2.05
SHFE Zin 15325.00 20.00 +0.13 21195.00 -27.70
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07