NEW YORK/LONDON (Reuters) - Copper cut its gains on Tuesday after Federal Reserve Chairman Ben Bernanke said the U.S. central bank was prepared to take further action to boost a slowing economy but offered few details.
Investors had hoped the central bank would signal it was moving closer to a third round of bond purchases to support the economy. But the Fed chief hewed closely to the message of watchful waiting, and gave few new clues.
Limiting declines in copper, however, was data showing U.S. industrial output expanded in June on a rebound in manufacturing, a reassuring sign for an economy that has looked wobbly in recent months.
Also underpinning the metal were signs that China’s smelters are betting on improved demand in the second half of the year. China accounts for about 40 percent of the world’s copper consumption.
“The slower rate of growth in China may not be as intense as first thought, and is probably helping to underpin copper in general here,” said Sterling Smith, vice-president of commodity research at Citibank’s Institutional Client Group.
Benchmark three-month copper on the London Metal Exchange fell to a session low of $7,576.75 a tonne after the comments, and later closed at $7,595 a tonne, little changed from a close of $7,590 on Monday.
RBC Capital Markets trader Randy North said copper was largely tracking macro-economic developments like the Fed comments and currency moves: “If you look at a chart of copper, it’s tracking euro moves pretty closely intraday at the moment.”
He added, however: “If we did get a sell off and copper fell through $7,000 a tonne, we would expect trade buying to provide support.”
In New York, COMEX copper futures also turned negative on Bernanke’s statement. The benchmark September contract fell 2.95 cents, or 0.85 percent, to settle at $3.4555 per lb. This move caused the market to give back much of Friday’s steep gains.
COMEX copper volume reached more than 48,000 lots in late New York trade, just over the 30-day average of more than 44,500 lots, preliminary Thomson Reuters data showed.
“Bernanke opened his mouth and everything was offered. The summer started early. Now all the talk is about stimulus and China’s slowing growth,” said a New York-based metals trader.
Expectations of more stimulus by the Fed had been stirred by Monday’s forecast downgrade of global economic growth by the International Monetary Fund and by a third consecutive monthly fall in U.S. retail sales in June.
With those expectations so far unmet, analysts might review already downbeat forecasts. A Reuters poll of 31 analysts this week called for cash copper prices to average $8,003 a tonne this year, a 5 percent downward revision from an earlier poll in April.
“Global economic worries always stress the copper market. If you want to get a quick read on the whole global economy, just look at copper price action,” Smith said.
Limiting falls in copper, however, data out earlier showed China’s refined copper output in June rose 11.6 percent on the year and 7 percent on the month to 518,000 tonnes.
Market players said this was due to smelters betting on improved demand in the second half of the year.
“Big producers like Jiangxi Copper have been delivering into LME warehouses in Asia for the past two months to take advantage of higher LME prices. We’ve heard the government has waived export duties on these deliveries,” said one Shanghai-based trader.
In other metals, battery material lead ended down at $1,893 a tonne from Monday’s close of $1,899; zinc, used in galvanizing, closed down at $1,865 from $1,900; and aluminum ended at $1,904 from $1,918.
Soldering metal tin closed up at $18,895 a tonne from $18,750, while stainless-steel ingredient nickel ended lower at $16,100 from $16,250.
Additional reporting by Carrie Ho in Shanghai and Maytaal Angel in London; Editing by Anthony Barker, Bernard Orr