Copper ends higher; market awaits Chinese data

NEW YORK/LONDON (Reuters) - Copper prices rose for a second straight day on Monday as the euro edged higher against the dollar and after encouraging comments from top consumer China boosted expectations of a recovery in demand, even as doubts lingered about the health of the debt-ridden euro zone.

With little news to give the market direction, focus remained on hopes the European Central Bank will take action to lower borrowing costs for Italy and Spain, in a further effort to resolve the three-year euro-zone debt crisis.

Sentiment also received a boost after inspectors from the International Monetary Fund, the European Commission and the ECB - known as the troika - concluded a visit to Greece and said it has made progress on its debt bailout program.

"There's a lot of shuffling and shifting, but there's not a lot of good, solid, quantifiable activity to really remedy the situation there," said Sterling Smith, commodity strategist at Citibank's Institutional Client Group in Chicago.7

The COMEX September contract settled 0.64 percent higher at $3.389 per lb, close to its intraday high of $3.3925, building on the prior session's near two-percent rally and feeding off of a stronger euro and healthier gains in global equity markets.

A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.

London Metal Exchange (LME) three-month copper ended at $7,495 a metric ton (1.1023 tons), up from the close of $7,445 on Friday when it rose 1.6 percent, its biggest one-day gain since July 13, after a better-than-expected U.S. jobs report.

A seasonally slow period for industrial demand due to summer holidays in the northern hemisphere is keeping copper volumes in check and prices range-bound between $7,200 and $7,800 per metric ton, where they have been stuck since late May.

But a raft of data from China this week, including industrial output for July, retail sales and inflation data on Thursday, could provide an impetus to jolt prices out of this range, analysts said.

"The Chinese data due later this week has the potential to cause a significant shift in the mood. And relatively low volumes mean that it could get quite volatile," said Ross Strachan, economist at Capital Economics.

Investors were reassured by China's central bank's pledge on Sunday to intensify fine-tuning of monetary policy in the second half of this year and to improve credit policy to bolster the real economy, echoing earlier government commitments amid an economic slowdown.

Demand from China has been sluggish so far this year, with the market awaiting signs that appetite for the metal used in power and construction is picking up there.

But in a move that could see prices coming under pressure, China's copper smelters plan to increase refined copper exports following a recent tax adjustment that reduced their costs to export and made such trades more attractive, two sources at smelters said on Monday.

"Given the tax change, you could end up with a situation where there are outflows from China on a regular basis and that would suggest that the import number is not going to be very high, meaning the strong (import) numbers that we saw at the back end of last year are unlikely to be replicated in the near future," Strachan said.

EUROPE EYED

Market confidence was boosted by hopes of further action by the ECB to help cut borrowing costs in Italy and Spain after the bank's President Mario Draghi said last week he will draw up plans for bond buying in the coming weeks.

U.S. shares hit fresh three-month highs on Monday.

But general euphoria and gains in commodities were limited by persistent worries about the ECB's proposed plan of action. Draghi said the bank would only act in cooperation with the euro-zone bailout funds, and would require countries to first ask for help.

"After a massive move upwards it's not unrealistic to see something of a correction and the market is again having another look at what is going on fundamentally, and it's not as positive as what the market thought last week," said Commerzbank analyst Eugen Weinberg.

"Longer term we see a bottoming out process, which is likely to soon be over, and stabilization of the market. We're likely to see falling (metals) inventories, mine closures in some metals and a pickup in Chinese (metals) buying."

Tin ended at $17,825 a metric ton from $17,900 at the close on Friday, zinc ended at $1,849 from $1,840, lead closed at $1,891 from $1,895 and nickel closed at $15,805 from $15,625.

Aluminum was untraded at the close, but bid at $1,878 from $1,860.

(Additional reporting by Melanie Burton in Singapore; Editing by Phil Berlowitz)