Copper traders who a week ago were the most bearish in four months are now the most bullish in a year after economic reports signaled accelerating growth from China to the U.S.
Seventeen analysts surveyed by Bloomberg said they expect prices to gain next week and four were bearish. A further three were neutral, making the proportion of bulls the highest since October 2011. They were the most negative since June 1 last week. Hedge funds’ bets on a rally are near the biggest in 14 months, U.S. Commodity Futures Trading Commission data show.
China had accelerating industrial production, retail sales and fixed-asset investment last month, reports showed yesterday. After slowing for seven quarters, its growth will gain for the following four quarters, based on the median of estimates from 24 economists compiled by Bloomberg. New-home construction in the U.S. rose to a four-year high in September. China consumes about 40 percent of the world’s copper and North America 11 percent, according to Barclays Plc.
“The market has been way too pessimistic on China,” said Christin Tuxen, an analyst at Danske Bank A/S in Copenhagen. “China will eventually stabilize and avoid a hard landing and we’ve got some clear signals that it is actually happening. We will see commodities, and metals in particular, get some support in the coming months.”
Copper rose 6.7 percent to $8,111.75 a metric ton on the London Metal Exchange this year, averaging $7,981, the second-highest on record. The MSCI All-Country World Index of equities gained 13 percent and the Standard & Poor’s GSCI gauge of 24 commodities added 3.5 percent. Treasuries returned 1.4 percent, a Bank of America Corp. index shows.
New-home construction surged 15 percent in September, the U.S. Commerce Department reported Oct. 17. Building permits, a proxy for future construction, jumped to the highest since July 2008. Construction generates about 40 percent of copper demand and 439 pounds of the metal are needed for a typical family home, the Copper Development Association estimates.
The Federal Reserve said Sept. 13 it will buy $40 billion of mortgage debt a month, China approved a $158 billion subways-to- roads construction plan, and central banks from Europe to Japan pledged more action to boost economies. China’s growth will quicken each quarter until it reaches 8.3 percent in the three months through September 2013, economists predict. Third-quarter growth was 7.4 percent, the government said yesterday.
Codelco, the world’s largest copper producer, expects a recovery in demand for commodities because of the stimulus in China, Chief Executive Officer Thomas Keller said in an Oct. 16 interview. China’s economic growth has started to stabilize, Premier Wen Jiabao said in remarks published Oct. 17 by the official Xinhua News agency.
The nation will be a “voracious” buyer of industrial metals even if growth slows, Cengiz Y. Belentepe, the head of industrial and precious metals trading at Barclays, said in an interview Oct. 10. The bank expects demand to beat supply by 41,000 tons next year, the fourth consecutive annual shortage.