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Copper edges up ahead of European Summit
NEW YORK/LONDON |
NEW YORK/LONDON (Reuters) - London copper rose, albeit mildly, for a second straight day on Tuesday, while U.S. prices eased as both markets consolidated from last week's six-month lows and remained transfixed on Europe's debt situation.
Recent signs of restocking by the world's top copper buyer China due to a favorable price arbitrage and further signs of stability in the U.S. housing market continued to provide some support to industrial metals, countering bearish news that Cyprus has become the fifth state in the euro zone to seek a bailout.
Given broader market doubts that a European summit later this week will make any meaningful progress in solving the region's debt crisis, which has weighed on demand for metals, would likely keep a lid on prices and bolster safer haven bids in the dollar and gold, analysts said.
"What I think you're going to continue to see is more of what we are seeing now: this slow, leak of confidence in the markets," said Zachary Oxman, managing director with TrendMax in Encinitas, California.
""Europe is going to continue to remain the headline. I would be bullish on the dollar and bearish on industrial metals, and that's the trade you're seeing today. That's the trend."
London Metal Exchange (LME) three-month copper rose $23 to end at $7,359 a ton.
In New York, the active September COMEX contract eased 0.50 cent to settle at $3.3205 per lb, after dealing from $3.3030 and $3.3445.
COMEX copper volumes crossed 80,000 lots in late New York trade, in line with the 30-day average, according to preliminary Thomson Reuters data.
"Copper is looking fundamentally very good, we've had decent Chinese refined imports, the Chinese will embark on more aggressive easing etc. But until people are more certain about macro-economic expectations for the second half they're not going to do anything," said VTB Capital analyst Andrey Kryuchenkov.
The European summit will take place in Brussels on June 28-29, but investors remained doubtful that the meeting, held for the 20th time, would yield any substantive measures to resolve the region's protracted debt crisis.
In the United States, meanwhile, data was uninspiring. U.S. home prices picked up in April for the third month in a row, but consumer confidence fell for a fourth time in June, while the Richmond Fed manufacturing index reversed gains seen in May.
On the plus side, however, the prospect of improving growth in China, the world's second-largest economy, was key to easing worries stemming from the financial turmoil in Europe and a sputtering economic recovery in the U.S.
A spokesman for the Chinese trade ministry said on Tuesday that Beijing's export growth is likely to improve for the rest of the year and the country could meet its 2012 target for 10 percent growth in trade.
"There are headwinds, but in general developing countries are moving to clear growth policies, especially with the Chinese interest rate cut, and we expect to see significant improvement in the second half of the year," said Natixis analyst Nic Brown.
For the moment, demand for all base metals in China remains flaccid, as downstream industries suffer from slowing domestic growth and a fall in demand for Chinese exports from major economies, especially Europe - China's top trade partner.
In a bid to revive aluminum output, China's top aluminum producing province of Henan has rolled out power subsidies to smelters, sources said on Tuesday, causing prices on the Shanghai Futures Exchange to fall more than three percent to the lowest in three years.
LME aluminum ended down $20 at $1,845 per ton, after touching a two-year trough at $1,839.
"Given their cyclical nature, industrial metals have suffered from the deterioration of leading economic indicators," Credit Suisse said in a research note.
"However, the sector remains a mixed bag. With the exception of tin, all markets are undervalued. The larger markets - copper and to a lesser extent aluminum - have better supply-demand balances and look healthier from a technical point of view, making them our preferred picks."
(Additional reporting by Carrie Ho in Singapore; editing by Anthony Barker and Bob Burgdorfer)
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