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Encouraging News from the U.S. is Dampened by Reports Out of China

Copper trading volumes were slow out of the gate this week because the London Metal Exchange, Europe’s copper trading hub, was closed for a bank holiday on Monday, May 5, 2014. The Wall Street Journal posted the most actively traded contract, for July delivery, was recently down 1.05 cents, or 0.3%, at $3.0595 a pound on the Comex division of the New York Mercantile Exchange.

Encouraging news from the United States is impacting the market value of copper. As most of the country is in the process of rebounding from one of the harshest winters in recent memory, the copper market got some good news thanks to a stronger-than-expected jobs report here in the states along with increased construction spending in the U.S. in March.

Last week the Commerce Department announced a 0.2 percent increase in construction spending in March. The spike in construction spending was fueled by an increase in apartment, single-family homes, factories, health care centers and office projects. Naysayers point to the slight surge as the economy having its usual seasonal bounce back after construction projects were delayed due to an unusually brutal winter across much of the country. In April, the U.S. gained jobs at the fastest pace in more than two years and the jobless rate fell.

As usual, any positive economic news tends to send metal prices higher. Copper was no exception, as prices rose 1.1 percent to close out last week. David Wilson, an analyst at Citi mentioned some positive news for copper in a Business Reporter article, “To me it looks like the copper market has turned a bit and is looking slightly better supported,” Wilson said. “There definitely seems to be an attitude change amongst investors towards copper to the point where we have more people talking about playing copper against aluminum; going long copper, short aluminum.”

Despite the positive sentiment readings from the U.S., the industrial metal remained pressured to the downside by worse-than-expected data from China, the metal’s top consumer. Government data on manufacturing output for April revealed a worse-than-projected PMI at 50.4. While that is an improvement from March’s reading of 50.3, it trailed expectations for a gain to 50.5. Helen Lau, a commodity analyst at UOB Kay Hian Ltd., told Bloomberg: “This China PMI data is kind of disappointing. To make the copper price rebound, we really need better-than-expected numbers.”

Market players are eyeing upcoming manufacturing data from China, as well as signs of economic strength in other major consumers.

What does all of this mean for the price of copper? The weather is better, construction projects are booming, jobs are increasing and the demand for copper is moving upward, but how much and for how long? We will keep an eye on this week’s reports and on the markets across the globe and keep you updated on the fluctuating price of copper.

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