Industrial metals hit multi-month highs on Monday, with copper touching its loftiest since April, as investors grew more optimistic about the economic outlook, especially in the United States. Institute of Supply Management data showed manufacturing activity in the US, as measured by the PMI, fell less than expected in July, coming in at 55.5 versus 56.2 in June.
The median forecast of 60 economists surveyed by Reuters was for a reading of 54.1. A reading above 50 indicates expansion in the manufacturing sector. Copper for three-months delivery on the London Metal Exchange ended at $7,510 a tonne, its highest since April 29, versus Friday's close at $7,298.
Aluminium touched a three-month high, while tin saw its highest since September 2008. Zinc, lead and nickel have all hit their highest since May, also helped by a weaker dollar. "(The data) supports the view that the US economy is not heading for a double dip. This number could possibly outweigh the Asian numbers we saw overnight," said Arne Lohmann Rasmussen, chief analyst at Danse Bank.
Manufacturing in top metals consumer China shrank in July for the first time since March 2009, with HSBC's PMI dipping below the 50 mark for the first time since the depths of the global recession. In the broader markets, however, optimism reigned.
World stocks kicked off August in a strong mood as upbeat results from BNP Paribas and HSBC revived confidence in corporate earnings and the economic outlook for the rest of the year. Investors also took comfort from data showing euro zone manufacturing growth accelerated in July largely due to strongly performing German factories.
A weak dollar makes dollar-priced metals cheaper for European investors. Earlier on Monday, the euro hit a three-month high versus the dollar, with a break above a key techincal level expected to provide further momentum. Copper, used extensively by the construction industry and in wiring, had been stuck in a range of about $600 a tonne since early June, which it broke last week, climbing above $7,000 a tonne as investors focused on strong earnings.
On Friday, all eyes will be on US non-farm payrolls for July. Copper inventories, seen by some as indicating demand trends, fell 425 tonnes on Monday, with overall stocks standing at 413,075 tonnes, their lowest since mid-November 2009.
Tin inventories also fell, indicating improving demand. Stocks were at 15,005 tonnes, the lowest since June 2009 and nearly halving this year. The metal ended at $19,880 a tonne from Friday's 19,500. LME nickel ended at $21,850 a tonne from $21,150, while lead ended at $2,214 a tonne from $2,075, having earlier risen more than 6 percent to $2,215, its best level since early May.
Zinc ended at $2,122 a tonne from $2,025, up nearly 5 percent on the day, while aluminium hit $2,222.50 a tonne, its highest since May 4, and ended at $2,217 a tonne from $2,170. Bhar said financing deals as well as talk of a launch of an exchange traded fund (ETF) in aluminium was helping the metal.
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