London - Copper rose to its highest level in more than a week on Friday, as optimism about the outlook for the global economy gathered pace, with US labour market data due later in the session likely to provide further direction for industrial metal prices.

Three-month copper on the London Metal Exchange rose in intraday trade to its highest since July 24 at $7,050 a tonne.

It traded at $7,020 a tonne at 11:47 SA time, up from a last bid of $6,998 a tonne on Thursday.

The metal used in power and construction is on track to rise 2.5 percent for the week, its first gain in three weeks.

It registered a monthly gain of 1.9 percent in July.

Factory activity in top metals consumer China was slightly stronger than expected in July, US manufacturing grew at its fastest in two years and European factories snapped a run of declining output, offering some support for metals demand.

Markets are now awaiting July US non farm payrolls figures for further signs of stabilisation in the US economy.

“The data shows that the US economy is coming out of the soft patch and any number (for non farm payrolls) that is above consensus will be seen as allowing the Fed to scale back on its stimulus,” said Robin Bhar, analyst at Societe Generale.

“What is supporting commodities is quantitative easing and any easing back could have a temporary bearish impact. But people have to remember that if the Fed scales back on stimulus it is because the economy is getting stronger. That is good news.”

Markets have been supported this week by a statement by the Federal Reserve that the US economy continues to recover but is still in need of support, offering no signs that it is planning to curb its bond-buying stimulus at its next meeting in September.

The European Central Bank (ECB)affirmed interest rates could fall further from record lows.

Non-farm payrolls were expected to have risen by 184,000 in July, with the jobless rate seen ticking down to 7.5 percent.

“If the non farm payrolls surprises on the upside, we could see a further pick-up in copper prices but I think gains might be limited,” said analyst Natalie Rampono of ANZ in Melbourne.

“Our Chinese economists have highlighted that order books are still pretty slow and the smaller-sized businesses are still struggling with tight credit conditions,” she said.

Nickel miners are clinging to plans to maintain production, despite a growing supply glut and prices around four-year lows, raising the risk of more writedowns and losses being unveiled in the current financial reporting season. - Reuters

 

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