Copper May Fall Before U.S. Growth, Consumer-Spending Reports
Copper may fall in London, paring the first monthly gain since March, before reports that might show the U.S. economy expanded at about the same pace and consumer spending cooled.
Gross domestic product in the U.S. probably increased by 2.6 percent in the second quarter, compared with a 2.7 percent first-quarter increase, economists said in a survey. Household purchases climbed 2.4 percent after expanding 3 percent, the survey showed. The U.S. is the world’s second-biggest consumer of copper after China.
“We’ve had quite a strong rally, so there is scope for a correction,” Charles Kernot, an analyst at Evolution Securities Ltd. in London, said by phone. Demand might soften in the “near term,” he said.
Copper for delivery in three months slipped 50 cents to $7,230 a metric ton at 11:42 a.m. on the London Metal Exchange after losing as much as 0.9 percent. The contract is up 11 percent in July, headed for the biggest monthly gain since last August. Futures for September delivery dropped 0.5 percent to $3.274 a pound on the Comex in New York.
The Commerce Department’s GDP and personal-consumption figure are due at 1:30 p.m. London time. The Thomson Reuters/University of Michigan index of U.S. consumer sentiment, scheduled for release at 2:55 p.m., probably will show a drop to 67 this month from 76 in June, according the median in a Bloomberg News survey.
The July rally has reduced LME copper’s drop this year to 1.9 percent. Prices climbed on reduced concern about a potential weakening of demand in China and the possibility that Europe’s sovereign debt-crisis might derail the region’s economic rebound.
“There is continuing demand within China, and there has been relatively good economic news that has come out,” Evolution’s Kernot said. Limits on production, a weaker dollar and contracting stockpiles of metal also helped to lift prices, he said.
Economic confidence in the euro region rose more than forecast in July, data showed yesterday. Europe probably will account for about 20 percent of global copper usage this year, according to Barclays Capital.
Xstrata Plc, the fourth-largest copper producer, said on July 27 first-half output fell on lower ore grades. That echoed comments this month from Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper miner, and BHP Billiton Ltd., the third-biggest producer.
Production constraints “helped, certainly as far as copper is concerned,” Kernot said.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose as much as 0.4 percent today. It has lost 4.8 percent in July, heading for a second monthly drop. A weaker dollar makes metals priced in the currency cheaper in terms of other monies.
Copper stockpiles tracked by the LME rose for a second day to 413,500 tons, daily exchange figures showed. They dropped 8.3 percent in July, the fifth monthly contraction in a row and the biggest decline since June 2009. Inventories are down 18 percent this year, on course for the first annual drop since 2004.
Canceled warrants, or bookings to draw metal from stockpiles, fell 8.4 percent to 32,675 tons today, down 15 percent from this year’s high on July 22. They slid 5.5 percent this month after surging 52 percent in June.
Aluminum for three-month delivery on the LME rose 2.2 percent to $2,138 a ton after touching $2,140, the highest intraday price since May 14. Immediate-delivery metal’s discount to the three-month price, the so-called contango, narrowed to $16.75 yesterday from $22 a week ago.
“Consumers are very active at the moment,” David Thurtell, a Citigroup Inc. analyst in London, said by telephone of the lightweight metal.
Zinc rose 0.2 percent to $1,994 a ton and lead was unchanged at $2,050 a ton. Nickel declined 0.3 percent to $20,620 a ton and tin fell 0.3 percent to $19,540 a ton.