US copper futures reversed earlier losses and turned positive early on Friday after surprisingly strong US new home sales data provided some relief to investors concerned about the downbeaten sector, traders said.
"We're definitely seeing a reaction to the numbers. Whether or not we can sustain this reversal is the question. Once we get into the flow of the day, we'll be able to tell where we may be going from here," said one dealer on the floor of the exchange.
Copper for December delivery was up 1.75 cents to $3.2940 a lb by 11:04 am EDT (1504 GMT) on the New York Mercantile Exchange's COMEX division, sitting just below its early-session peak of $3.30.
Technicians continued to keep an eye on the widening of the September/December spread, and its influence over future price direction. "We have seen the spreads beginning to indicate a little bit of bearishness on the fundamental side ... not an overwhelming amount, but enough to bring some pressure," said one market technician. "But, if we see these things start to tighten again, with the premium going back to the nearby, that could start to see some support come back into this market," he added.
By 10:00 am, futures volumes were estimated at 5,506 lots. Sentiment received a boost after the Commerce Department reported sales of new US homes unexpectedly rose 2.8 percent to an 870,000 annual sales pace in July, reversing two months of declines, while inventories eased.
Earlier, a report showed new orders for long-lasting US-made goods surged much more than expected in July, for their biggest gain since September. "It's unexpectedly firm. So combined with durable goods data, this suggests that the economy was fairly sturdy heading into the market disruption in August," said Pierre Ellis, senior global economist at Decision Economics in New York.
Fundamentally, the market continued to be well supported on expectations of continual strong demand from China heading into the fourth quarter and ongoing industrial action in Latin America, which could push the market further into a supply deficit.
In its latest monthly bulletin, the International Copper Study Group (ICSG) said world refined copper production lagged consumption by 300,000 tonnes in May this year, against a deficit of 6,000 tonnes in the corresponding period last year.
Meanwhile, a three-week old strike at Grupo Mexico's Cananea copper mine continued, with the company advising customers to be prepared if a contract cannot be completed.
In Peru, miners at Southern Copper will decide next week if and when they will strike to demand new contracts wit higher salaries. Overnight inventory data showed London Metal Exchange (LME) copper warehouse inventories rose by 1,750 tonnes to 125,550 tonnes on Friday, while COMEX copper stocks eased by 4 short tons to 20,908 short tons on Thursday.