Copper Hits 4-month High

(Reuters) – Copper rose to its highest in more than four months on Thursday as recent macroeconomic data from the world’s two largest economies, the United States and China, brightened the outlook for metals demand.

Following Wednesday’s manufacturing data from the top metals consumer China and a major user of metals the US, investors felt more comfortable betting on riskier assets, which gave a boost to commodities.

But caution ahead of a European Central Bank (ECB) news conference due at 12:30 GMT after the bank held rates as expected kept a lid on European equity markets.

Copper for three-months delivery on the London Metal Exchange firmed to $7 640 a ton in the open outcry trade, compared with a close of $7 606 a ton on Wednesday. It touched $7 677 a ton earlier, its highest since April 27.

“It doesn’t look as bad as it did before,” said Jesper Dannesboe, senior commodity strategist at Societe Generale, referring to the economic outlook after strong Chinese and US PMI data over the past couple of days.

“It looks like there’s not going to be a double-dip recession, but maybe a period of slowdown of the recovery.”

The positive data from the world’s top two economies overcame a weak US private sector payrolls number that the market largely ignored. However, the US jobs market will swing back into focus on Friday with government data for August.

“The manufacturing data was good, very good in fact, but the fact remains that without job creation, the US economy isn’t going anywhere very fast,” a trader in Melbourne said.

“This is short-term euphoria built on shaky ground. The market is getting very excited about next year, with good cause, but it’s running well ahead of fundamentals and it needs a healthy $400-$600 correction before we start to build a rally.”

CAUTIOUS

But other data from key metal-consuming industries such as the auto sector was not very rosy on Wednesday.

Automakers posted their weakest US August sales in 27 years, underscoring uncertainty about the strength of the recovery in the world’s largest economy.

In Europe, growth data looked upbeat, with gross domestic product in the 16-nation currency area expanding by 1,9% in the second quarter, compared with a previous reading of 1,7%.

But traders were reluctant to make big bets after recent rally. “It’s overbought now,” Dannesboe said.

Falling stocks continued to offer support for copper prices as inventories now stand at 399 000 t, their lowest since November 2009 and cancelled warrants – material earmarked for delivery – account for 7,25% of the total stocks.