Copper surged nearly 3% to its priciest level in one week high on Friday driven by strong labor market and services sector data from the United States that reinforced confidence about the pace of recovery in the economy.
The economically sensitive base metal rallied alongside a sharp move in global equities, that propelled the Nasdaq index to an 11 year high, after data showed the world’s largest economy created 243,000 jobs in January, far outstipping analysts’ expectations while the unemployment rate dropped to 3 year low of 8.3%.
Bulls also cheered a separate report showing the pace of growth in the US services sector unexpectedly accellerated to its highest level in nearly a year.
Mr Adam Sarhan CEO of Sarhan Capital said that “The fact that copper is turning higher, equities are turning higher, suggests that the markets are forecasting stronger, not weaker, economic growth in the months ahead.”
London Metal Exchange benchmark 3 month copper jumped USD 230 or 2.7% to close at USD 8,575 per tonne. Gains were extended in after hours to USD 8,597 its highest level in one week. In New York, the key March COMEX contract settled up 12.05 US cents or 3.2% at USD 3.9015 per lb after dealing between USD 3.7775 and USD 3.9055.
After a sluggish start to the week that saw copper back away from last week’s 4 month highs at USD 8,679.50 in London and USD 3.9390 in New York prices recovered Friday to help copper post its fourth straight weekly gain. Analysts expect the bullish momentum to continue in the week ahead.
Mr Sarhan said that “We were lower in the early half of the week, and now inching out a small gain for the week. It had a very strong January, and it’s continuing to move higher in February. Until that changes, you have to give bulls the benefit of the doubt.”
Although the data paints a rosier outlook for the US economy, analysts warned that direction in metals markets is likely to be dictated to a greater degree by news out of top consumer China, where demand concerns linger.
Mr Edward Meir analyst at INTL FCStone said that “This was a knee-jerk reaction but we need the dust to settle a bit and to get a bit more clarity about what is happening in China. The outlook for China is much more important. The fact that premiums there are softening and there has been a big buildup in stock is more of a concern to the market.”