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Copper rises on stronger euro; Spain, US data in focus

Copper edged higher on Thursday, helped by a stronger euro on expectations Spain would seek a bailout to rescue its economy, although gains were capped by uncertainty about global growth, while trading volumes were low as China remained on holiday.

By (Reuters)

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Published: Thu 4 Oct 2012, 6:54 PM

Last updated: Tue 7 Apr 2015, 11:25 AM

Benchmark copper on the London Metal Exchange (LME)shook off losses from the previous session to rise to trade at $8,329.50 in official rings, from Wednesday’s close of $8,290.

The euro rose against the dollar, with investors keeping a close eye on possible financial aid for Spain as the European Central Bank (ECB) left interest rates unchanged at its latest meeting.

A news conference with ECB president Mario Draghi was due to begin at 1230 GMT, with markets awaiting signals from Draghi about when he might pull the trigger on a new bond-buying plan.

Following the ECB’s plans for a bond-purchase programme for struggling euro states, investors are still waiting for Spain to bite the bullet and request a formal rescue.

“It (a potential bailout for Spain) removes some uncertainty in the market. It is a not a question of if but when for Spain (to ask for a bailout) and that will be seen as a huge relief for the market,” said Robin Bhar, analyst at Societe Generale.

“But the potential upside for copper is pretty limited whilst there is uncertainty about China’s growth and U.S. growth and with the euro zone in recession, and that is going to keep a lid on rallies.”

Trading volumes were thin as China is still on a public holiday. China is the world’s top consumer for refined copper, accounting for as much as 40 percent of demand.

Investors are likely to look ahead to non farm payrolls data from the United States, due on Friday, for indications of a recovery in the country’s labour market.

Sentiment surrounding the U.S. labour market was boosted in the previous session after data showed private sector hiring rose by a better-than-expected number in September.

Activity in the vast services sector also picked up, suggesting the economy remained on track for modest growth.

“We think the slant of the market after the payroll numbers on Friday will really be the action one should pay attention to. For now look at continued back and forth as the market consolidates terrific gains made since August,” RBC Capital said in a note.

Lower premium

In industry news, Japan’s biggest copper smelter, Pan Pacific Copper, is in talks with buyers in China to slash its term premium for 2013 shipments by 15 percent from this year to $85 a tonne, a source familiar with the matter said.

The lower premiums reflect slowing demand growth in the world’s top consumer of metals.

Uncertainty about the outlook for physical demand continues to sour sentiment for the metal used in power and construction as global economic growth struggles.

“Overall we expect Q4 prices to continue to take cues from the macro rather than the physical market,” said James Luke, a Hong Kong-based commodities analyst at China International Capital Corporation (CICC).

“Prices will be well supported but I don’t expect physical demand to surprise on the upside and that should limit prices relative to other more purely investor-driven metals such as gold.”

In other metals, battery material lead traded at $2,312.50 a tonne in official rings, from Wednesday’s close of $2,306, while zinc was at $2,089 from $2,082 at the close on Wednesday. Nickel changed hands at $18,650 from $18,525.

Aluminium was untraded in rings, but bid at $2,115, from a last bid of $2,102.50 on Wednesday, and tin traded at $22,220 from a last bid of $22,100. It earlier hit its highest level since early May at $22,350.