Copper Up on Asia Hopes; Chicago PMI Caps Rise

Oct 31, 2012 (Dow Jones) NEW YORK--Copper futures edged higher on Wednesday, but finished well off the day's highs after a gauge of Chicago-area business activity missed expectations.

The most actively traded contract, for December delivery, rose 1.15 cents, or 0.3%, to settle at $3.5175 a pound on the Comex division of the New York Mercantile Exchange.

Copper trimmed its gains after the Chicago Business Barometer, inadvertently released early on Wednesday, came in weaker-than-expected. The survey of Chicago-area purchasing managers came in at 49.9, below expectations for 51. Readings below 50 indicate contraction.

Such reports are seen as indicator for likely copper demand, and the report also weighed on other growth-sensitive assets. Copper is used in a wide range of industries, including power, construction and general manufacturing.

Futures had held larger gains early in trading, taking cues from initial optimism after the opening of New York equities markets after a two-day closure because of Hurricane Sandy and a weaker dollar. Copper futures and equities tend to move in the same direction as both assets are closely linked to expectations for economic growth. A rise in the euro also aided copper's advance by making the dollar-denominated futures appear cheaper for holders of the European common currency.

CME Group Inc. (CME), which owns the Comex, reopened floor trading at its Nymex and Comex commodity derivatives units in New York for the first time since Oct. 26. The CME's New York locations were shut due to a mandatory evacuation order in advance of the storm, but electronic trading continued as normal.

Trading in copper this week has been muted with many trading desks thinly staffed during the storm, but activity on Comex picked up on Wednesday. Edward Meir, an analyst with INTL FCStone, said in a note that investors would likely "gravitate to the sidelines" and hold off on placing large bets ahead of Friday's reading on the U.S. labor market and next week's presidential elections.

Copper's gains on Wednesday also came as stronger economic data from a string of Southeast Asian countries further bolstered copper prices, said traders at RBC Capital Markets in a note. Stronger economic growth in Taiwan and an uptick in South Korea's industrial production fanned hopes of a regional recovery.

They added that China, the world's largest consumer of copper, is expected to report that its manufacturing activity expanded for the first time in three months in data due to be released Thursday. China accounts for around 40% of global copper demand, and weakness in its manufacturing sector has been a concern for traders in recent months.