Copper futures regain positions on strong Europe data, Fed stimulus outlook weighs

Copper rose back to positive territory after trading mostly lower throughout the day as upbeat data from Germany and Great Britain supported the metals demand prospects while pressuring the U.S. dollar. Surprisingly positive housing data from the U.S. on Tuesday continued to underpin the market, but also spurred speculations for an earlier-than-projected deceleration of Feds monetary stimulus. Preliminary estimates for a widening global surplus in 2014 limited gains.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in March traded at $3.226 per pound at 10:50 GMT, up 0.23% on the day. Prices shifted in a days range between $3.233 and $3.206 a pound. The industrial metal fell by 0.7% on Tuesday but rose back to positive weekly territory following Wednesdays rebound, up 0.2%.

Futures received a boost after a report by research company GfK AG signaled consumer confidence in Germany will jump to the highest level in December since August 2007. The GfK German Consumer Climate index rose to a six-year high of 7.4 in December, up from a revised 7.1 in November, beating projections to remain unchanged. This comes after Chancellor Angela Merkel reached an accord with the Social Democrats to form a wide coalition, more than two months after she won national elections.

Also fanning positive sentiment for the industrial metals demand prospects, data showed that Great Britains economic recovery accelerated in the third quarter, driven by investment and house building which offset a decline in exports.

The Office for National Statistics reported that Britains economy grew by 0.8% in the third quarter, matching both projections and the preceding periods 0.8% growth. Year-on-year, U.K. gross domestic product rose by 1.5% in the three months through September, once again meeting expectations and the preceding periods reading.

Consumer spending surged by 0.8% in the third quarter, an eight straight quarterly advance, while government spending jumped by 0.5% and imports rose by 0.4%. Exports however plunged by 2.4%. Production expansion remained unchanged at 0.6%, while construction growth was revised down to 1.7% from 2.5%.

Samuel Tombs, an economist at Capital Economics Ltd. in London, commented for Bloomberg: “The further improvement in many of the timely business surveys suggests that the economy will continue to grow strongly in the fourth quarter. With firms now showing signs that they are willing to spend their cash stockpiles and the pound still at a relatively weak level, it seems likely that the recovery will become better-balanced soon.”

The upbeat Europe data strengthened the euro and the pound, which pressured the U.S. dollar and allowed dollar-denominated commodities to regain positions. The U.S. dollar index, which measures the greenbacks performance against a basket of six major peers, traded at 80.55 at 10:52 GMT, down 0.10% on the day. The December contract fell to a three-week low of 80.50 minutes after the release of the data, while days high was touched at 80.74. Weakening of the dollar makes raw materials priced in it cheaper for foreign currency holders and boosts their appeal as an alternative investment.

U.S. housing data, Fed stimulus

The metal also drew support by unexpectedly upbeat housing data from the U.S. released on Tuesday, which however fueled speculations for an earlier-than-expected deceleration of Feds bond buying program (QE). The U.S. is the second biggest consumer of the metal used as a conductor and construction material.

A report by the Commerce Department showed that permits for U.S. home construction, which lead housing starts by at least a month, rose to the highest level in nearly 5-1/2 years in October, indicating a robust recovery of the U.S. housing market. Building permits jumped to 1.034 million last month, defying expectations for a decrease to 0.940 million. Permits surged to 0.970 million in September, beating expectations for a rise to 0.930 million from August’s 0.926 million.

Year-on-year, building permits surged by 13.9% in October, while on monthly basis they advanced by 6.2% following a 5.2% gain in September.

Meanwhile, a separate gauge measuring prices of single-family home prices in the U.S. jumped in September to the highest annualized level in 7-1/2 years. The S&P/Case-Shiller Composite-20 Home Price Index, which measures prices at 20 metropolitan areas, rose by an annualized 13.3% in September, beating forecasts for a moderate gain to 13.0% from August’s 12.8% increase. Month-on-month, numbers matched forecasts for a 0.7% increase, following a 1.3% jump in August.

Gains however remained limited by preliminary estimates for a widening global surplus in 2014. According to Barclays Plc and the International Copper Study Group, supplies are expected to exceed consumption next year, resulting in a glut that may almost triple to a 13-year high of 272 000 tons.

Data by the International Copper Study Group showed the global market for refined copper swung to a surplus of 21 000 tons in August due to higher output after running at a deficit for three months.