Copper futures rally 1% on upbeat euro zone manufacturing PMIs

Investing.com - Copper prices bounced off a three-month low on Tuesday, after stronger-than-expected data on euro zone manufacturing activity boosted hopes for an increase in demand for the industrial metal.

The preliminary euro zone manufacturing purchasing managers’ index rose to a 14-month high of 52.5 this month from a final reading of 52.2 in May.

German and French manufacturing activity also improved more than expected in June, fueling optimism over the region’s growth outlook and adding to evidence that the European Central Bank's massive stimulus program was taking effect.

Europe as a region is third in global demand for the industrial metal. Copper traders often use manufacturing numbers as indicators for future demand growth.

Copper for July delivery on the Comex division of the New York Mercantile Exchange climbed 3.0 cents, or 1.16%, to trade at $2.597 a pound during European morning hours.

Futures were likely to find support at $2.558, the low from June 19, and resistance at $2.642, the high from June 18. A day earlier, copper dipped 0.2 cents, or 0.08%, to end at $2.567.

In China, data released earlier showed that the HSBC Flash Manufacturing Purchasing Managers' Index inched up to 49.6 this month from 49.2 in May, beating expectations for an increase to 49.4 but remaining below the 50-point level that separates growth in activity from contraction for the fourth consecutive month.

The data underlined speculation that policymakers in Beijing will have to introduce further easing measures to jumpstart the economy amid lackluster growth.

The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.

Elsewhere, gold futures for August delivery inched up 30 cents, or 0.03%, to trade at $1,184.40 a troy ounce, while silver futures for July delivery shed 16.7 cents, or 1.03% to trade at $15.97 an ounce.

Investors continued to monitor developments surrounding talks between Greece and its international creditors, amid hopes that a deal was within sight.

Euro zone finance ministers failed to reach agreement over Greece’s bailout at an emergency meeting on Monday, but indicated that a final deal could be made later this week.

Eurogroup head Jeroen Dijsselbloem said new reform proposals from the Greek government were “broad and comprehensive,” and a good basis to restart stalled negotiations.

But German Chancellor Angela Merkel and International Monetary Fund head Christine Lagarde both warned that there was still a lot of work to be done.

Greece’s existing bailout is set to expire at the end of this month, when it must also repay €1.6 billion to the IMF. A default by Greece could trigger the country’s exit from the euro zone.

Meanwhile, ,market players were looking ahead to U.S. data on durable goods orders due later in the session for fresh indications on the strength of the economy and the timing of a U.S. rate increase.

Data released Monday showed that U.S. existing home sales in May rose to the highest level since November 2009. The National Association of Realtors said that existing home sales increased 5.1% to 5.35 million units last month from 5.09 million in April. Analysts had expected existing home sales to rise 4.4% to 5.26 million units in May.

The upbeat data boosted optimism over the health of the economy and supported the case for a U.S. interest rate hike later this year.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.