Comex Copper Pares Gains After Retail Sales

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"Copper remains correlated closely with equities and the euro."

Copper for July delivery rose 1.1% to $2.8950/lb. on the Comex division of the New York Mercantile Exchange.

July copper peaked overnight at $2.9450/lb.—its strongest level in a week.

"It's in line with the general rebound across the markets," said William Adams, analyst with Fastmarkets in London. "The Dow put in a strong performance yesterday. Equity markets in Asia put in a strong performance."

The DJIA gained 273.28 points Thursday, and Japan's Nikkei index gained 1.7% overnight. Some traders were buying to cover copper positions in which they previously sold, Adams said.

But while markets have been re-embracing risk, copper nevertheless trimmed its gains in response to early morning U.S. economic data, said a New York trader. May retail sales fell 1.2%, when the forecast had been for a 0.2% increase. This was the largest decline since September.

Copper remains correlated closely with equities and the euro, said the trader. These outside markets have tended to rise lately when optimism about a global recovery picks up, and vice-versa. Copper has followed along, as the recovery will determine the strength of future copper demand.

Copper inventory data continues to decline, which is supportive since it suggests good demand. London Metal Exchange copper warehouse stocks fell 1,400 metric tons Friday to 465,000. Weekly data from the Shanghai Futures Exchange fell for the sixth straight week, declining 13,392 metric tons to 139,332.

Adams offered caution about copper's upside, suggesting some traders may view rallies as a selling opportunity. While the euro has recovered some from a four-year low early in the week, worries about sovereign debt in some European nations have not gone away.

"The rebound we are seeing is likely to be fragile," Adams said. "People will be sort of wary. There could be some nervous trading going forward."

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