Copper futures fell for the second straight session as U.S. economic concerns outweighed signs of factory gains in China, the world’s top metal consumer.
The Federal Reserve said on Sept. 18 that it needed to see a sustained rebound in the U.S. labor market before paring $85 billion in monthly debt purchases. A gauge of Chinese manufacturing from HSBC Holdings Plc and Markit Economics rose to a six-month high in September.
“If the Fed is reluctant to start things off by cutting a modest $10 billion from its monthly buying program, how bad could things potentially get” after tapering starts, Edward Meir, an analyst at INTL FCStone in New York, said in a report. “The restrained tone we are seeing in metal prices over the last few weeks just as China’s economy is showing signs of perking up tells us that the metal markets need to see more before prices respond more forcefully to the upside.”
Copper futures for December delivery dropped 0.7 percent to settle at $3.2985 a pound at 1:16 p.m. on the Comex in New York. The metal fell 0.8 percent on Sept. 20. The price has declined 9.7 percent this year.
Prices also fell amid concern that most U.S. government operations will stop after the fiscal year ends next week if the Obama administration and lawmakers fail to agree on a funding bill. Forty percent of global investors surveyed in a Sept. 10 Bloomberg poll said they would pull back on U.S. markets in the event of a shutdown.
The reading of 51.2 for a China Purchasing Managers’ Index by HSBC and Markit exceeded a 50.9 median estimate in a Bloomberg survey of economists. Above 50 means expansion. The U.S. is the second-biggest copper consumer.
“Metals are mixed as a better-than-expected flash China PMI has been offset by concerns that the Fed’s decision to maintain stimulus means the U.S. economy is in worse shape than previously thought,” RBC Capital Markets Ltd. said in a report.
On the London Metal Exchange, copper for delivery in three months fell 0.5 percent to $7,245 a metric ton ($3.29 a pound). Lead, nickel and tin dropped. Aluminum and zinc rose.