Copper futures rise on upbeat China manufacturing activity

Copper futures extended weekly gains on Friday after a government and a private report showed China’s manufacturing sector expanded at a faster pace in October, adding to previous upbeat economic data from the world’s largest consumer and boosting the industrial metals demand prospects. Investors also assessed mixed data from Europe and awaited a key report for the U.S. manufacturing sector by the Institute for Supply Management.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in December traded at $3.321 per pound at 9:59 GMT, up 0.62% on the day. Prices held in range between days high of $3.326, near Wednesdays one-week high, and low of $3.296 per pound. The industrial metal lost 0.4% on Thursday but extended its weekly advance to 1.5% following Fridays rebound, poised for best performance in six weeks.

Prices surged on Friday after both a government and a private report showed China’s manufacturing sector expanded at a faster pace in October compared to the preceding month, implying robust demand prospects in the world’s largest consumer. The National Bureau of Statistics of China reported that the Asian nation’s manufacturing Purchasing Managers’ Index (PMI) rose to an 18-month high of 51.4 in October from 51.1 in September, beating analysts’ predictions for a surge to 51.2.

A separate private report by Markit Economics and HSBC showed China’s manufacturing sector expanded at a faster pace than the preceding month and matched a preliminary reading. The HSBC China Manufacturing PMI surged to 50.9 last month, beating September’s 50.2.

Despite the slight advance, this was the strongest improvement in operating conditions in seven months. Output at plants rose for a third consecutive month and at the quickest pace since April due to stronger domestic and foreign demand as new orders and export orders surged. The report also marked the strongest expansion of new business from abroad in a year, supported by increased U.S. demand. This comes after data earlier in the month showed China’s economy grew by 7.8% in the third quarter, beating the preceding three months’ 7.5% GDP growth and suggesting the Asian economy will likely meet the government’s goal for a 7.5% annual economic expansion.

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, commented: “The final HSBC China Manufacturing PMI rose to a seven-month high in October, with the stronger momentum of manufacturing growth translating into the first expansion of employment since March. This in turn should support private consumption growth in the coming months. China is on track for a gradual growth recovery.”

Meanwhile, manufacturing activity in Europe also advanced, but growth slowed in some members of the union. Swedens manufacturing PMI posted at 52.0 in October, down from 56.0 in September and underperforming expectations. Norways manufacturing activity surged to 53.6 last month from 52.3 in September, beating forecasts to inch up to 52.4. Switzerlands SVME PMI fell to 54.2, trailing both projections and the preceding months reading of 55.3.

In Great Britain, manufacturing activity fell last month but remained relatively close to 2-1/2 year high levels. The manufacturing index provided by The Chartered Institute of Purchasing and Supply declined to 56.0 in October, trailing expectations for a drop to 56.4. Septembers reading received a downward revision to 56.3 from initially estimated at 56.7. Manufacturing activity on the island rose to a 2-1/2 year high of 57.1 in September.

The industrial metal also drew support after data on Thursday showed manufacturing activity in the Chicago region expanded in October at the fastest pace in two and a half years as orders and production surged. The Chicago Purchasing Managers’ Index surged to 65.9 from 55.7 in September, confounding analysts’ projections for a drop to 55.0. This was the highest level of activity since April 2011 and the biggest increase in more than three decades. Orders rose to the highest level in nine years.

However, a stronger dollar limited gains. The U.S. dollar index for December settlement rose for a sixth consecutive day and traded at 80.54 at 10:00 GMT, up 0.26% on the day. The U.S. currency gauge jumped to a day’s high of 80.62, the strongest level since October 16, and extended its weekly advance to over 1.6%. Strengthening of the greenback makes dollar-denominated raw materials more expensive for foreign currency holders and limits their appeal as an alternative investment.