London copper bounced off six-month lows on Friday after the US economy showed signs of strength, but lingering global growth concerns kept a recovery in check as markets await China’s economic data next week.
A robust US labour report and improving manufacturing data calmed turbulence in global markets that has extended across stocks and commodities and sent oil to its cheapest in four years, giving investors some reprieve as US stocks eked out slight gains.
“Everything got hit at once, because people are coming around to the notion that the global economy is starting to slow down. Many countries are in recession and it's scary,’’ said analyst Ed Meir at INTL FCSTONE in New York.
“I don't think this is the bottom. I think we’ll have another retest of the lows and maybe bounce from there,’’ he added.
Three-month copper on the London Metal Exchange climbed 0.6 per cent to $6,594 a tonne by 0210 GMT, after losing 1.4 per cent in the previous session. Copper prices slid to their weakest since April 15 at $6,535 a tonne on Thursday.
Euro zone crisis
Market attention is returning to the euro zone due to stagnating growth, low inflation, budget problems in France and Italy and rising political risk in Greece, where the bloc’s debt crisis began in 2009.
China’s GDP data
China’s economy likely grew at its weakest pace in more than five years in the third quarter as a property downturn weighed on demand, a Reuters poll showed, raising the chances of more aggressive policy steps that may include cutting interest rates. China will publish GDP data on October 21.
The most-traded December copper contract on the Shanghai Futures Exchange wallowed down 1 per cent at 47,220 yuan(7,710) a tonne.
BNP Paribas estimates that the net build up of unreported copper stocks from 2009-2013 may have been greater than 1.5 million tonnes, much of which may be sitting outside bonded warehouses and strategic state reserves.
“We expect pressure to remain more to the downside, until deep into 2015. Copper would be highly exposed were the world economy to deteriorate sharply.’’ The bank expects copper prices to average at $6500 in 2015, from $6890 a tonne this year.
Other LME contracts bounced between half to nearly 1.5 percent after a series of fresh lows on Thursday. LME zinc fell to its weakest in more than three months, LME nickel hit a 7-month trough, and lead and tin hit 17- and 15-month troughs respectively.
Many aluminium producers have cut loss-making capacity or shut down completely as they struggle with low London Metal Exchange prices, high energy costs and a flood of new capacity from China.