By Jim Williams
Copper edged lower on Monday, as traders keep an eye out for an onslaught of corporate earnings reports expected this week.
Copper fell for a first session in five as stockpiles expanded the most since March and some investors viewed last week’s rally as excessive. Copper for delivery in September dropped 0.7 percent to $3.257 a pound early Monday morning. Current prices can be found here.
The red metal rose 3.5 percent last week and touched $3.282, the highest price since February. But, copper for delivery in three months fell 0.3 percent to $7,127 a ton on the LME.
“Hesitant metals price action so far today (Monday) as analysts bring forward their interest rate increase projections,” Michael Turek, head of the metals desk at NewEdge states in his daily briefing. “Copper has been on the defensive on the back of a large stock influx into South Korea. The background to this appears to be the ongoing flight to warehousing quality in the Far East. Perhaps it should be pointed out however that cancelled warrants remain high and dips in all the metals seem to be attracting some renewed investor interest in view of the increasingly compelling supply/demand picture.”
Orders to remove the metal from London Metal Exchange (LME) warehouses jumped 21 percent, the most since May 23, to 33,000 tons. Experts predict copper will trade between $6,980 and $7,280 a ton this month.
As Michael Turek mentioned above, Goldman Sachs Group Inc. brought forward its forecast for higher U.S. interest rates before the release of minutes of last month’s Federal Reserve policy meeting, scheduled for Wednesday.
Data shows copper’s 14-day relative-strength index exceeded 70, a level signaling a potential impending drop to some analysts who study technical charts.
“We likely have done a little too much, too quickly,” Edward Meir, an analyst at INTL FCStone Inc. in New York, notes. “We could see prices push a little higher over the course of July, although we suspect that the bulk of the move is likely behind us.”
London Metal Exchange copper stocks are near six-year lows, supporting prices, while production of refined copper has slowed because of a series of smelter outages this year. A six-month halt on exports from major producer Indonesia has tightened conditions as well.
“Most of the copper that was meant to be exported has been produced,” said analyst Joel Crane of Morgan Stanley. “It’s going to come to market eventually. We just don’t know when. If it comes to light that nothing is going to come out of Indonesia, that will be a game changer for copper this year.”
Some fund managers are betting the industry has reached the bottom of a downturn. “(While) copper could head back down towards $6,000 per tonne, it is far closer to the end than the beginning of its bear market,” BNP Paribas stated in a Reuters article. “Copper should bottom by mid-2015, when the increasingly positive longer-term picture will start coming into view.”
Here is a list of reports this week expected to impact copper:
Monday
HSBC in collaboration with Markit Economics will release their final Chinese manufacturing PMI for April. The preliminary reading released on April 23rd showed a slower-than-expected rebound to 48.3 from March ‘s final figure of 48.0, which was the lowest level since July.
The Eurozone’s Sentix Investor Confidence index, which is projected to post a minor advance to 14.2, while a separate report may show producer deflation remained unchanged at -0.2% in April and accelerated to an annualized -1.8%, compared to -1.7% in March.
The Institute for Supply Management is expected to report that activity in the US services sector continued to recover after growth in February slowed down the most since August 2010. The ISM non-manufacturing PMI is expected to have registered at 54.1 in April, up from 53.1 in March.
Tuesday
Data is poised to show retail sales in the Eurozone fell by 0.4% last month but grew at an annualized 0.9% from a month earlier. Here in the US trade deficit is expected to have narrowed to $40.50 billion in March.
Wednesday
Retail sales in Australia – poised to have gained.
The Chinese HSBC Services PMI.
Thursday
China’s National Bureau of Statistics will release April trade data, which may show a third straight monthly decline in exports, while imports are projected to have rebounded from last month’s 11.3% plunge.
Friday
China’s statistics bureau will likely report consumer inflation in the world’s second-biggest economy declined for a second month in April, by 0.1%.
Also due on Friday are Italy’s industrial output figures, coupled with industrial and manufacturing production data from the U.K.
More details can be found here.
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