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Copper futures benefit from uplifting Chinese manufacturing data

Jul 24, 2012 02:56 PM

Copper futures were bouncing back on Tuesday, propelled by strong economic data coming from the globe's top consumer of the reddish metal, Reuters reports.

Concerns about the sovereign debt crisis ravaging Spanish banks, markets and public finance systems reducing demand for industrial metals were alleviated, at least temporarily, by a strong purchasing managers index reading in China.

The Asian nation hosts the globe's second-largest economic system yet is the top consumer of the reddish metal. Copper is sensitive to worldwide economic and financial developments due to its myriad uses in manufacturing, construction and additional industry.

"China's PMI data beat market expectations and gave shorts a reason to cover today," derivatives director Andy Du with Orient Futures told the news source, while also sounding an air of caution about more troubled world regions. "But underlying sentiment is still bearish, given the fragile state of the global economy, and we are not taking our eyes off developments in the euro zone."

At 1:37 p.m., copper futures fell 0.84 percent, a 0.0285 cent loss to $3.3515 per pound.

Copper futures had dropped on Monday amid speculation indicating that Spain might have no choice but to pursue emergency bailout funding.

Euro zone's most recent soft spots

The second quarter of this year saw the Spanish economy delve further into recession, according to the nation's central bank.

The country's regions endured a funding crisis that helped drive the nation closer to needing a full bailout, Reuters reports. Spanish bond yields pushed to a high of 7.5 percent, representing the top level since the shared currency of the European Union first appeared on the market.

The beleaguered nation also is likely to cause a ripple effect that will harm what are believed to be the region's sturdiest and healthiest economies. Germany, host of the euro bloc's largest economy, had its outlook downgraded by Moody's Investors Service on Monday.

The Netherlands and Luxembourg also saw their outlook downgraded to negative from stable.

Italy is viewed as next in line after Spain. Ten cities in the nation hosting the region's third-largest economy reported troubles with their financial situations, Reuters reports, citing local media.

But the reddish metal enjoyed an upward spike from Chinese economic data.

Manufacturing outlook brighter in Asian nation

The outlook for the manufacturing sector in Japan benefited from the July reading of the purchasing managers index being 49.5 in July after having registered at 48.2 during the month prior, Bloomberg reports.

That return, though a preliminary reading, is believed to be the highest of the metric's results in about five months, according to HSBC Holdings and Markit Economics.

"We're beginning to see some response that policy easing is having an effect and you could argue that you're seeing them in the PMI numbers," chief economist Richard Jerram with Bank of Singapore told Bloomberg. He said Europe has "seen in recent months they really will do everything they can to hold it together."

Another financial institute forecast the good news out of the Asian nation to continue.

Standard Chartered predicted China's development and growth will push past 8 percent this quarter after having notched 7.6 percent during the second quarter of the year. That marked the sixth consecutive quarter when the nation's growth showed weaker signs.

Balancing act

The reddish metal is caught in limbo between the Asian nation showing indications of resiliency after recent hiccups have caused eyebrows to rise and the ongoing struggle with debt in the euro zone, The Wall Street Journal reports.

Also mildly impacting the reddish metal is conjecture about how, or if, the U.S. will intervene to spur its economy, the globe's largest.

Speculation is continuing about the U.S. Federal Reserve's plans to employ a third round of quantitative easing, more colloquially known as QE3.

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