Copper Futures Prices Soften despite Improving Demand

December 6, 2016 5:47AM CST

Copper futures prices continue to soften, even after U.S. data showed strength in a key report from the non-manufacturing sector showed economic strength that benefits industrial metals demand

The December contract in copper futures slid 1 percent to 2.662 throughout the first portion of the U.S. commodities futures markets trading session. The January contract fell 1.11 percent to 2.6615.

Some analysts attributed the fall in copper futures to profit-booking by speculators, but the metal's strength at the London Metal Exchange (LME), capped the losses. Italian Prime Minister Matteo Renzi's resignation also reverberated across commodities futures markets initially, but the effect has been muted a day after the announcement.

A drop in commodity prices is also weighing on energy and mining companies and pressuring the price of copper futures. Commodities futures markets in the U.K. are now focusing on the European Central Bank’s meeting later this week, where many expect it to announce an extension of its massive bond-buying program.

Back in the U.S., commodities futures markets had a number of economic reports to absorb on Tuesday. Factory Orders for October rose 2.7 percent in October, according to the U.S. Department of Commerce. It was the largest increase since June 2015. Economists had forecast an increase of 2.6 percent in October.

The November Institute for Supply Management Services report jumped to 57.2 in November, compared to October’s reading of 54.8 and economists’ expectations of a rise to 56.

Third-quarter Productivity rose 3.1 percent, while Unit Labor Costs for the same month grew by 0.7 percent, according to the U.S. Department of Labor. Forecasts were for 3.3 percent and 0.2 percent, respectively. Productivity has barely risen 1 percent per year since 2007, compared with a 2.6 percent growth rate from 2000-07. Economists say the cost of employing a worker has been rising in the past few years due to a decreasing U.S. unemployment rate and a decline in the number of qualified job applicants

The October Trade Balance rose 18 percent in October to $42.6 billion, a nearly 14-month high and in line with most economists’ expectations, according to the U.S. government. The deficit is unlikely to continue to decline, though, given a strong dollar that’s weighing on exports and an improved U.S. economy that is boosting demand for imports of copper futures.

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