Oil demand for road transport should peak around 2025
Investors are also cautious ahead of China economic data due this week, including numbers on import growth, inflation and bank lending.
Three-month copper on the London Metal Exchange was $8,132 in official rings from $8,175 at the close on Friday. The exchange was closed on Monday for a bank holiday.
“You have a little bit of negativity coming out of the U.S. and a lot of negativity out of Greece and Spain, and I think that’s the main problem the metal market is trying to contend with,” said Nic Brown, head of commodities research at Natixis.
Attention is focused on Greece where politicians are struggling to form a government after voters plunged their country into limbo in Sunday’s election. The uncertainty has reignited fears its hard-fought bailout deal could unravel, forcing the country’s exit from the euro.
Investors are also waiting to see how the new French president-elect, Socialist Francois Hollande, who has advocated an approach to tackling the debt crisis centred more on growth, which may create tensions with Germany’s insistence on fiscal austerity.
“France’s fiscal stability is not really in doubt but the election results in Greece are bound to be a source of event risks in future,” Credit Suisse said in a research note. “For now, markets are likely to focus on fundamentals.”
The uncertainty in Europe eroded the euro, and the dollar rose against a basket of currencies, which also hit metals. A stronger dollar makes commodities prices in the U.S. unit more expensive for holders of other currencies.
Markets were somewhat soothed by news that Spain was prepared to use public funds to help its troubled banks. Spain is the euro zone’s fourth-largest economy and investors have focused on its troubles because it would be expensive to provide a bailout similar to the one supporting much smaller Greece.
Metals investors have also been left with little conviction in the strength of the U.S. economy following a weaker-than-expected U.S. jobs report on Friday.
“Copper continues to trade in a well-worn range of $8,000 to $8,500. Without significant new news out of China there is not much chance of any breakout in the coming week,” RBC said in a research note.
That could come this week. Economic data from China is likely to strengthen the view that the world’s No. 2 economy has bottomed out as inflation slows and output picks up.
A Reuters poll of economists found that the annual pace of export growth could have slowed again in April, but an anticipated rise in imports implies industry could be preparing for an upturn at home and abroad.
Declining copper inventories could also support the metal, suggesting an uptick in demand.
Latest data shows that copper stocks dropped by 2,175 tonnes, mostly out of U.S. locations. Headline LME stocks are at 228,450 tonnes, the lowest since October 2008 and half of the levels in October last year.
Tin was $21,345 in rings from $21,450 while zinc was $1,983.50 f rom $1,996 at Friday’s close. Lead was $2,085 from $2,100 and nickel was $17,470 from $17,575.
Oil demand for road transport should peak around 2025
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