Copper swings ahead of U.S. employment data, Fed stimulus outlook

Copper swung between gains and losses on Tuesday and traded mostly higher in the European session as investors weighed broad expectations that the Federal Reserve will refrain from scaling back its monetary stimulus this year against the release of delayed U.S. employment data which may show the economy added more jobs in September.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December traded at $3.307 per pound at 8:43 GMT, up 0.09% on the day. Prices held in range between session high and low of $3.310 and $3.296 per pound respectively. The industrial metal rose on Monday and extended its weekly advance to 0.5% after Tuesdays gain.

Copper shifted in a narrow range on Tuesday as market players awaited the release of key U.S. employment data to gauge demand prospects in the worlds second biggest consumer. The most anticipated September unemployment rate and non-farm payrolls will be published on Tuesday at 12:30 GMT, coupled with average hourly earnings and average weekly hours. The report will not reveal any information about the government shutdown but it will be the final employment data the Fed will use before FOMC’s October 29-30 meeting. Some analysts expect tapering to take part in December but many have begun to speculate that we won’t see any deceleration before 2014.

Economists polled by Reuters project payrolls to have surged by 180 000 in September following a rise of 169 000 in August, while the unemployment rate is expected to have remained flat at 7.3%. U.S. government agencies began releasing a backlog of delayed economic data after the 16-day federal government shutdown was ended last week by a temporary accord lawmakers reached.

A senior Federal Reserve official said on Monday that it will be tough for the central bank to take a decision to start scaling back its bond purchases in December, given the lost output during the 16-day government shutdown and the still standing fiscal differences between Democrats and Republicans.

Chicago Fed President Charles Evans said for CNBC: “October is a tough one. December? I think we need a couple of good labor reports and evidence of increasing growth, GDP growth. It is probably going to take a few months to sort that one out. It is very difficult to feel confident in December given that we’re going to repeat part of what just took place in Washington.”

According to a Bloomberg survey of analysts conducted on October 17-18, the Federal Reserve will begin decelerating its quantitative easing program in March, while a poll last month showed the tapering will commence in December.

The industrial metal also drew support after China’s General Administration of Customs reported on Monday that the Asian nation imported 347 305 tons of copper in September, 32% higher than a month earlier and the highest since February 2012. Inbound shipments of unwrought copper and products surged to the highest since March 2012, a report last week showed.

Richard Fu, director for Asian commodity trading at Newedge Group SA in London, said for Bloomberg: “The strong China import figures demonstrate demand for the largest metal consumer is not bad at all. The physical demand is not bad at all.”

However, the metal’s long-term outlook continued to be seen by analysts as bearish as China’s government seeks to shift economy growth form investment-driven to more consumption-based, resulting in a slower expansion. Expectations of a surplus next year has made the smaller markets of nickel, zinc and lead more attractive for investors. Chinas National Bureau of Statistics reported that the nations copper output rose by 10.6% in September from a month earlier, while demand is expected to fall behind during the winter.

Chunlan Li, analyst at consultancy CRU in Beijing, said for CNBC: “Chinas copper output increased in September, with smelters raising their operational rates as the weather cooled down, and because TC/RCs (processing fees) were very high. Copper production will continue to grow, but its hard to say if it will grow at the same pace … Even though concentrate supply is increasing, it takes time for new refinery capacity to ramp up production.”