Copper traders who a week ago were the most bearish in four months are now the most bullish in a year after economic reports signaled accelerating growth from China to the U.S.
Seventeen analysts surveyed by Bloomberg said they expect prices to gain next week and four were bearish. A further three were neutral, making the proportion of bulls the highest since October 2011. They were the most negative since June 1 last week. Hedge funds’ bets on a rally are near the biggest in 14 months, U.S. Commodity Futures Trading Commission data show.
China had accelerating industrial production, retail sales and fixed-asset investment last month, reports showed yesterday. After slowing for seven quarters, its growth will gain for the following four quarters, based on the median of estimates from 24 economists compiled by Bloomberg. New-home construction in the U.S. rose to a four-year high in September. China consumes about 40 percent of the world’s copper and North America 11 percent, according to Barclays Plc.
“The market has been way too pessimistic on China,” said Christin Tuxen, an analyst at Danske Bank A/S in Copenhagen. “China will eventually stabilize and avoid a hard landing and we’ve got some clear signals that it is actually happening. We will see commodities, and metals in particular, get some support in the coming months.”
Copper rose 5.3 percent to $8,001.25 a metric ton on the London Metal Exchange this year, averaging $7,980, the second-highest on record. The MSCI All-Country World Index of equities gained 12 percent and the Standard & Poor’s GSCI gauge of 24 commodities added 2.1 percent. Treasuries returned 1.4 percent, a Bank of America Corp. index shows.
New-home construction surged 15 percent in September, the U.S. Commerce Department reported Oct. 17. Building permits, a proxy for future construction, jumped to the highest since July 2008. Construction generates about 40 percent of copper demand and 439 pounds of the metal are needed for a typical family home, the Copper Development Association estimates.
The Federal Reserve said Sept. 13 it will buy $40 billion of mortgage debt a month, China approved a $158 billion subways-to-roads construction plan, and central banks from Europe to Japan pledged more action to boost economies. China’s growth will quicken each quarter until it reaches 8.3 percent in the three months through September 2013, economists predict. Third-quarter growth was 7.4 percent, the government said yesterday.
Codelco, the world’s largest copper producer, expects a recovery in demand for commodities because of the stimulus in China, Chief Executive Officer Thomas Keller said in an Oct. 16 interview. China’s economic growth has started to stabilize, Premier Wen Jiabao said in remarks published Oct. 17 by the official Xinhua News agency.
The nation will be a “voracious” buyer of industrial metals even if growth slows, Cengiz Y. Belentepe, the head of industrial and precious metals trading at Barclays, said in an interview Oct. 10. The bank expects demand to beat supply by 41,000 tons next year, the fourth consecutive annual shortage.
Chinese officials will begin a once-a-decade leadership transition next month. The new government may change policies on infrastructure spending and that would raise questions about industrial-metals demand, Ray Key, global head of metals at Deutsche Bank AG, said in an interview Oct. 8.
The International Monetary Fund cut its 2012 global growth forecast to 3.3 percent last week, compared with a July prediction of 3.5 percent, and expects the euro area to contract 0.4 percent this year. Europe accounts for 18 percent of copper usage, Barclays estimates. Codelco cut the premium charged to European copper buyers next year by $5 to $85 a ton, two people with direct knowledge of the matter said.
Goldman Sachs Group Inc. lowered its 12-month price estimate 11 percent to $8,000 on Oct. 15 as weakening demand in Europe, Brazil and India, combined with growth in mine supply, may mean a return to a glut from the second half of 2013. The bank still expects prices to be at $9,000 in six months.
Speculators’ wagers on a rally were the highest since August 2011 in the week ended Oct. 2, CFTC data show. They had bet on price declines from May to August and held a net-long position of 23,448 futures and options by Oct. 9, data show.
The analysts were surveyed toward the end of LME week in London, an annual event that attracts thousands of miners, refiners and traders for talks on metals markets and supply contracts. The 135-year-old LME will have record trading this year after the busiest September ever, Chief Executive Officer Martin Abbott said this week. Shareholders approved a $2.2 billion takeover by Hong Kong Exchanges & Clearing Ltd. in July.
In other commodities, 10 of 26 traders and analysts surveyed by Bloomberg said gold would climb next week and nine were bearish. Bullion rose 9.9 percent to $1,718.40 an ounce in London since the start of January, heading for a 12th annual gain. Holdings in gold-backed exchange-traded products reached a record 2,583 tons on Oct. 11, data compiled by Bloomberg show.
Four of eight people surveyed expect raw sugar to increase next week and three predicted a decline. The commodity slid 13 percent to 20.28 cents a pound on ICE Futures U.S. in New York this year.
Thirteen of 26 people surveyed anticipate higher corn prices next week and 10 said the grain will retreat, while 12 of 26 said soybeans will rise and 11 expect lower prices. Corn rose 18 percent to $7.6275 a bushel this year as soybeans advanced 27 percent to $15.36 a bushel in Chicago. Both crops surged to records since August as the U.S. endured its worst drought in more than 50 years.
The S&P GSCI gauge of raw materials dropped 5.3 percent since closing at a five-month high Sept. 14 as European leaders worked to resolve the region’s debt crisis.
“Some bearish statistics made the market choppy,” said Donald Selkin, the New York-based chief market strategist at National Securities Corp., which manages about $3 billion of assets. Commodities are “getting some support from good U.S. data and will also get additional support should Europe actually work towards a resolution.”
Gold survey results: Bullish: 10 Bearish: 9 Hold: 7 Copper survey results: Bullish: 17 Bearish: 4 Hold: 3 Corn survey results: Bullish: 13 Bearish: 10 Hold: 3 Soybean survey results: Bullish: 12 Bearish: 11 Hold: 3 Raw sugar survey results: Bullish: 4 Bearish: 3 Hold: 1 White sugar survey results: Bullish: 4 Bearish: 3 Hold: 1 White sugar premium results: Widen: 0 Narrow: 5 Neutral: 3