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Copper turns higher on Europe data, dollar caps gains
LONDON (Reuters) - Copper broke a four-day losing streak on Tuesday, rising modestly after better-than-expected French and German growth data, but a firm dollar after a report showing forecast-beating U.S. retail sales kept a lid on metals prices.
Three-month copper on the London Metal Exchange closed at $7,416 a metric ton (1.1023 tons) from $7,395 at Monday's close, and rebounded from a session low of $7,366, the weakest level in more than a week.
Copper, which has shed about 12 percent since the beginning of May, has been trapped in a range of $7,300-$7,600 over the past three weeks in thin volumes during the European holiday season.
"There's no indication of any spot demand. So when there's nothing else, the big players remain sidelined and try to figure out the macro outlook," said analyst Andrey Kryuchenkov at VTB Capital in London.
Forecast-beating German and French growth data eased concerns that the euro zone's two biggest economies were sliding into recession with the bloc's ailing periphery, lifting the euro.
"The slightly positive news out of Germany and France this morning has helped the market find some footing," RBC said in a research note. "Overall the market remains on the defensive as concerns China is behind the growth curve continue to saturate the market."
U.S. data showed retail sales rose for the first time in four months in July, a sign that consumers could drive faster economic growth in the third quarter.
The forecast-beating data dampened speculation of another round of monetary easing and lifted the dollar. A stronger dollar makes commodities priced in the unit more expensive for holders of other currencies.
The euro also pared gains after the German ZEW economic sentiment survey came in worse than expected, however, and the euro zone economy contracted by an expected 0.2 percent during the second quarter.
SCANT CHANCE OF ALUMINIUM CUTS
LME aluminum closed at $1,856 a metric ton from $1,867 at the finish on Monday. LME stocks data showed a rise 29,000 metric tons.
UBS was negative about aluminum, which has fallen some 21 percent from a peak of $2,361.50 in March, in a third quarter commodities research report.
"Our least-preferred commodities are those with high exposure to China's fixed capital formation, which face broader deterioration in demand and little prospect of imminent production cuts such as nickel, aluminum, and met-coal," the note said.
UBS forecasts three-month aluminum to average $0.95/lb ($2,095/ metric ton) in the third quarter, before rising to $1.04 ($2,293/metric ton) in the last quarter.
China has enough alumina stockpiles to prevent a shutdown of its aluminum plants in coming months, despite a sharp fall of bauxite imports after Indonesia imposed a 20 percent export tax on minerals in May, according to Kunal Agrawal, director of Asia Metals & Mining at BNP Paribas Securities.
This undermines prospects that a fall in output by the world's biggest producer will support metal prices. "Any aluminum capacity shutdowns in China in the coming months will not be for want of raw material," Agrawal said.
Three of China's biggest alumina producers plan to invest at least $1 billion in bauxite mines and refineries in Indonesia to guarantee supplies of the aluminum raw material.
Chinese bauxite imports plunged to around 187,000 metric tons in June, from around 5.6 million metric tons in May.
In other LME metals, three-month lead closed at $1,855 a metric ton from $1,867 on Monday. The tom-next spread went into a backwardation as high as $9.30 ahead of third Wednesday, the monthly prompt date.
LME data showed a dominant position in lead holding 80-90 percent of warrants and cash positions..
Zinc closed flat at $1,819 a metric ton, tin at $18,275 from $17,700, and nickel at $15,470 from $15,375 after touching a three-year low on Monday.
(Additional reporting by Carrie Ho in Shanghai; Editing by Anthony Barker)
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