DJ BASE METALS: Comex Copper Futures Stage Strong Comeback By Allen Sykora
Of DOW JONES NEWSWIRES
Another inventory decline, rebounding equities, technical considerations, labor uncertainty in Chile and an upward revision in Japanese economic growth were all cited as factors that helped copper rise sharply on Monday.
The most-active July copper contract gained 9.85 cents to settle at $3.3560 per pound on the Comex division of the New York Mercantile Exchange.
The metal recouped much of Friday's 11.95-cent loss that had been blamed on worries about recently higher Treasury yields, which backed off slightly Monday.
The further decline in London Metal Exchange warehouse inventories of copper supported prices, reported Dave Meger, senior metals analyst with Alaron Trading. A daily research report from Barclays noted that the 900-metric-ton fall in LME stocks was the 16th straight day of net outflows, and the 120,550 total is the lowest since October.
"In addition, the overseas equities were a little firmer," Meger said. "That, along with a technical bounce, was a consideration for the move. And we had positive Commitments of Traders data."
The London FTSE 100 index advanced 0.7%, while the German DAX Xetra 30 Index gained 1.1% and the French CAC-40 index rose 0.8%.
Meger and Bill O'Neill, one of the principals with LOGIC Advisors, both commented that July copper appeared to find some chart support after falling back below the $3.30 area Friday. The futures bottomed that day at $3.2440, but got no weaker than $3.2720 overnight and were above $3.30 the entire open-outcry session on Monday.
"I continue to view the $3.20 to $3.30 area as support," said Meger. "Given the hard sell-off and stops hit below $3.30 (Friday) that achieved prices just below $3.25, we are seeing a nice bounce-back."
"Copper seems to have pretty good support once you get under $3.30 and around the $3.25 level," O'Neill added.
A sharp upward revision in first-quarter Japanese gross domestic product was also supportive for copper, O'Neill said.
"That was a very significant upward revision to 3.3% from 2.4% on an annualized basis," O'Neill said. "It really indicates that we have a situation where we have very strong European and Asian growth in general, and the U.S. about to rebound. That enabled the market to move higher today."
He also cited spillover buying from gold's recovery from weakness late last week.
The weekly late-Friday Commitments of Traders data from the Commodity Futures Trading Commission was also constructive for copper, Meger said.
The funds - or large non-commercial accounts - trimmed their net short position in Comex copper in the week to last Tuesday for the first time in three weeks. They pared their net short position to 9,618 lots for futures and options combined, down from 11,571 the prior week. The bulk of the change was due to apparent short covering, as the number of total shorts fell by 1,268.
"That led one to believe you might see some higher prices from here on out," Meger said. "And, it looked like you had some fresh buying in the market. That is something the market takes as a positive sign."
The data showed that the number of total longs rose by 685.
A trader and a daily Triland Metals research report both described the market as subdued.
"With the macro backdrop much less threatening - (and) assets elsewhere seeing some bargain hunting - buyers surfaced in copper, too," said Triland. "With sentiment also assisted by concern over potential labor problems at Codelco, the U.S. market then followed the LME's firmer price lead."
Going forward, O'Neill said, a key may be Treasury yields, analysts said. Rising yields resulted in selling in most precious and base metals late last week as they drug down equities, and weaker stocks in turn tend to create worries about the economy and thus copper demand.
"That is something still to be watched," O'Neill said. "If the psychology of interest rates really starts to pressure global stocks, that would be a drag on copper. But at least for today, we have a little bit of a respite as far as that is concerned."
Copper could face some choppiness going forward, with the market also monitoring potential labor problems at Grupo Mexico and Codelco, O'Neill added.
"There could be some problems elsewhere as well," he said. "There is a little bit of labor unrest underpinning the market."
The most recent Comex inventory data, released late Friday afternoon, were down 343 short tons at 26,113 short tons.
Copper settlements (ranges include electronic and pit trading): July (HGN07) $3.3560; up 9.85c; Range $3.2720-$3.3620 Sept (HGU07) $3.3550; up 9.75c; Range $3.2725-$3.3600
MRX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
