Copper surged nearly three per cent to its priciest level in one week high on Friday, driven by strong labour market and services sector data from the United States that reinforced confidence about the pace of recovery in the economy.
The economically-sensitive base metal rallied alongside a sharp move in global equities, that propelled the Nasdaq index to an 11-year high, after data showed the world’s largest economy created 243,000 jobs in January, far outstipping analysts’ expectations, while the unemployment rate dropped to a three-year low of 8.3 per cent.
Bulls also cheered a separate report showing the pace of growth in the US services sector unexpectedly accellerated to its highest level in nearly a year.
“The fact that copper is turning higher, equities are turning higher, suggests that the markets are forecasting stronger, not weaker, economic growth in the months ahead,” said Adam Sarhan, chief executive of Sarhan Capital.
London Metal Exchange (LME) benchmark three-month copper jumped $US230 or 2.7 per cent to close at $US8,575 a tonne. Gains were extended in after-hours to $US8,597, its highest level in one week.
In New York, the key March COMEX contract settled up 12.05 US cents or 3.2 per cent at $US3.9015 per lb, after dealing between $US3.7775 and $US3.9055.
After a sluggish start to the week that saw copper back away from last week’s four-month highs at $US8,679.50 in London and $US3.9390 in New York, prices recovered Friday to help copper post its fourth straight weekly gain. Analysts expect the bullish momentum to continue in the week ahead.
“We were lower in the early half of the week, and now inching out a small gain for the week. It had a very strong January, and it’s continuing to move higher in February. Until that changes, you have to give bulls the benefit of the doubt,” Sarhan said.
Although the data paints a rosier outlook for the US economy, analysts warned that direction in metals markets is likely to be dictated to a greater degree by news out of top consumer China, where demand concerns linger.
“This was a knee-jerk reaction but we need the dust to settle a bit and to get a bit more clarity about what is happening in China,” said Edward Meir, analyst at INTL FCStone.
“The outlook for China is much more important (for the metals market). The fact that premiums there are softening and there has been a big buildup in stock is more of a concern to the market.”
Signalling softer demand, inventories of copper in warehouses monitored by the Shanghai Futures Exchange surged by more than one third over the past two weeks, data showed, due to strong imports in January and slower consumption during the Lunar New Year holidays.
“It is difficult to read the numbers because of the Chinese New Year, but nevertheless it does seem the rush of imports was not to go for immediate consumption but rather into stocks, which gives pause for thought,” BNP Paribas analyst Stephen Briggs said.
A dip in China’s non-manufacturing sector also dampened spirits.
“Overall, it seems that China’s appetite for metals is currently less voracious, particularly after the sharp price increase during the Chinese New Year holiday,” Credit Suisse said in a research note.
The metals market is also keeping tabs on buy-out talks between commodities trader Glencore and mining group Xstrata, which would create a group worth more than STG50 billion ($A74.26 billion).
“People will be looking at any implications for this,” Briggs said.
“Clearly these sorts of mergers increase concentration in the mining industry, which is bullish … but not necessarily good news for consumers.”
Metal Prices at 1838 GMT (0538 Saturday AEDT)
Metal Last Change Pct Move End 2011 Ytd Pct
COMEX Cu 390.20 12.10 +3.20 343.60 13.56
LME Alum 2247.00 52.00 +2.37 2020.00 11.24
LME Cu 8560.00 215.00 +2.58 7600.00 12.63
LME Lead 2224.00 60.00 +2.77 2035.00 9.29
LME Nickel 21305.00 455.00 +2.18 18710.00 13.87
LME Tin 24350.00 200.00 +0.83 19200.00 26.82
LME Zinc 2154.00 59.00 +2.82 1845.00 16.75
SHFE Alu 16190.00 -80.00 -0.49 15845.00 2.18
SHFE Cu* 59820.00 -60.00 -0.10 55360.00 8.06
SHFE Zin 15955.00 10.00 +0.06 14795.00 7.84
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07