Copper declines on stronger dollar, China growth woes

Investing.com - Copper prices were down for the second straight session on Tuesday, as a broadly stronger U.S. dollar and concerns over a slowdown in China dampened demand for the industrial metal.

On the Comex division of the New York Mercantile Exchange, copper for July delivery shed 0.7 cents, or 0.23%, to trade at $2.914 a pound during European morning hours.

Futures held in a tight range between $2.900 and $2.919. A day earlier, copper dipped 0.9 cents, or 0.31%, to close at $2.920, the first daily loss in eight sessions.

Prices of the red metal rallied to a five-month peak of $2.937 on May 1. Futures were likely to find support at $2.875, the low from May 1, and resistance at $2.937, the high from May 1.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.45% to trade at 96.03 early Tuesday.

The dollar remained supported after data on Monday showed that U.S. factory orders rose at the fastest pace in eight months in March, adding to indications that the economic recovery is regaining momentum.

New orders for U.S. factory goods rose by a larger than forecast 2.1% in March after a revised 0.1% decline in February.

The data came after economic reports late last week indicated that the U.S. recovery had turned a corner following a recent soft patch.

Meanwhile, data released Monday showed that Chinese manufacturing activity contracted at the fastest rate in a year in April, adding to concerns over a slowdown in the world’s second-largest economy.

China's HSBC final manufacturing purchasing managers' index slipped to 48.9 in April, down from a preliminary reading of 49.2 and compared to 49.6 in the previous month.

The dismal data reinforced expectations that policymakers in Beijing will have to introduce further stimulus measures to jumpstart the economy amid lackluster growth.

Since November, the People's Bank of China has introduced a series of stimulus measures, including lowering interest rates twice and cutting the reserve requirement ratios of major banks twice, in order to spur economic activity and boost growth.

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

Elsewhere, gold futures for June delivery tacked on $1.00, or 0.08%, to trade at $1,187.80 a troy ounce, while silver futures for July delivery slumped 6.8 cents, or 0.41% to trade at $16.37 an ounce.

Later in the day, the U.S. was to release data on construction sector activity and the trade balance, while the Institute of Supply Management was to release a report on U.S. service sector activity.

Investors are also waiting for the U.S. nonfarm payrolls report for April due on Friday for further clues on when the Federal Reserve may raise interest rates.