Copper retreats from one-month high on U.S. employment data, China monetary policy

Copper prices fell from yesterdays one-month high after the U.S. Labor Department reported that the U.S. economy added less jobs in September and as Chinas benchmark money-market rate rose the most since July, raising concern over the metals demand prospects in its two largest consumers.

On the Comex division of the New York Mercantile Exchange, copper futures for December settlement fell by 0.75% to $3.311 per pound at 8:43 GMT. Prices held in a range between days high and low of $3.337 and $3.301 per pound respectively. The industrial metal rose by nearly 1% on Tuesday but trimmed its weekly advance to over 0.6% after Wednesdays retreat.

The copper market was pressured after the U.S. Department of Labor reported yesterday that the U.S. economy added 148 000 jobs in September, sharply underperforming a median forecast of 93 economists surveyed by Bloomberg for a 180 000 surge. August’s reading received an upward revision to 193 000 payrolls from initially estimated at 169 000, signalling that the U.S. labor market lost momentum prior to the 16-day government shutdown.

The U.S. unemployment rate, based on a separate Labor Department survey of households, fell by 0.1% to 7.2% in September, beating expectations to remain flat. However, the participation rate, which measures the number of people who are either employed or are actively looking for work, remained the lowest since August 1978 at 63.2%, indicating that the fall in the unemployment rate was based on people who stopped searching for a job.

The metal sustained further losses after Chinas benchmark money-market rate surged the most since July. Data by the National Interbank Funding Center showed the countrys seven-day repurchase rate jumped 45 basis points to 4.03% in Shanghai. Chinas central bank refrained from funding the market on concern that ample credit could fuel inflation after the countrys National Bureau of Statistics reported that home prices in four major cities rose to the highest since January 2011, while consumer inflation gained at the fastest pace since February.

Tetsu Emori, the chief fund manager at Astmax Asset Management Inc., said for Bloomberg: “Stocks and metals were hit by concern that China will tighten its monetary policies to curb rising housing prices and inflation. The U.S. payroll data also put downward pressure on metals.”

Losses were however limited as the poor U.S. employment data supported broad expectations that the Federal Reserve will refrain from decelerating its quantitative easing program until 2014. According to a Bloomberg survey of 40 analysts conducted on October 17-18, the Fed will begin decelerating its monetary stimulus in March. The yellow metal has been tracking shifting expectations for a reduction in Fed’s bond purchases throughout the year and has lost 20% so far.

The dollar slumped to the lowest since the end of January after the release of yesterdays U.S. payrolls, providing support to dollar-denominated commodities. The U.S. dollar index, which measures the greenback’s performance against six major peers, traded at 79.39 at 8:43 GMT, up 0.11% on the day. Prices fell to a near 9-month low of 79.19 earlier in the session, while day’s high stood at 79.44. The December contract shed almost 0.6% on Tuesday, extending its weekly decline to nearly 0.4%. Weakening of the greenback makes dollar-priced raw material cheaper for foreign currency holders and boosts their appeal as an alternative investment.