Copper rallies on upbeat China data

Copper rose on Thursday as the Chinese manufacturing sectors activity expanded at the fastest pace in four months, suggesting economic stabilization is taking place and boosting demand prospects for raw materials.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in September traded at $3.365 a pound at 8:34 GMT, up 1.78% on the day. Prices held in range between days high and low of $3.368 and $3.296 per pound respectively. The industrial metal snapped four days of declines and erased previous weekly losses, extending current weeks advance to 0.1%.

Copper reversed its weekly movement as the Chinese manufacturing sector expanded at the fastest pace in four months, data showed on Thursday. The Chinese HSBC Manufacturing PMI, prepared by HSBC Holdings Plc and Markit Economics, surged to a four-month high of 50.1, signalling expansion that was based on a rebound in new orders. The figure outperformed analysts’ expectations for a surge to 48.3 from July’s final reading of 47.7, an 11-month low. The indicator added to promising reports for July’s factory output, retail sales and exports, providing positive signs that the world’s second biggest economy is stabilizing.

Levels above 50 indicate expansion in the respective sector. Flash figures are released approximately six business days prior to the end of the month. The final reading, as well as the government statistics, will be released on September 1. Monthly Report on China’s Non-manufacturing Purchasing Managers Index is due at September 3.

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, commented: “Chinas manufacturing growth has started to stabilise on the back of modest improvements of new business and output. This is mainly driven by the initial filtering-through of recent fine-tuning measures and companies’ restocking activities, despite the continuous external weakness. We expect further filtering-through, which is likely to deliver some upside surprises to Chinas growth in the coming months.”

Signs for an increase or decline in the Asian country’s industrial activity cause strong fluctuations in copper pricing as the metal is widely used in China’s vast manufacturing sector. The nation accounts for around 40% of global consumption.

Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said for Bloomberg: “This is a nice big surprise to the markets. Today’s HSBC flash PMI reading should be quite positive to market sentiment and may bolster the Chinese currency, commodities and other China-related assets.”

Market players will also be looking ahead at the upcoming data to further gauge the U.S. economic activity and the industrial metal’s demand prospects. On Thursday, last week’s Initial Jobless Claims likely rose by 10 000 to 330 000, while the Markit Flash U.S. Manufacturing PMI for August is projected to have advanced to 54.0 from July’s 53.7. On Friday, July’s New Home Sales are expected to have declined to 0.490 million houses sold, down from 0.497 million in the preceding month.