Copper ends up 1 percent on strong euro, growth hopes

A worker checks a shipment of copper inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, about 164 km (101 miles) northwest of Santiago, April 16, 2012.

NEW YORK/LONDON (Reuters) - Copper rose 1 percent on Thursday, supported by a weaker dollar and expectations that recent financial data could spur growth-supporting measures that would boost global metals demand.

After the London Metal Exchange (LME) close, copper prices neared their intra-day highs in late New York trading, buoyed by a firmer tone in U.S. equities after comments from German Chancellor Angela Merkel appeared to back the European Central Bank's efforts to fight the euro zone crisis.

Merkel said ECB President Mario Draghi's vow to do all that is necessary to defend the euro zone is in line with what European leaders have been saying.

COMEX copper for September delivery rose 3.30 cents, or 1 percent, to settle at $3.3825 per lb, near the upper end of its $3.3415 to $3.3870 session range.

London Metal Exchange (LME) three-month copper ended up $63.50 at $7,449 a tonne.

Earlier in the day, copper benefited from a firmer euro versus the dollar after data showing a small unexpected rise in U.S. jobless claims and a surprise drop in housing starts renewed expectations the Federal Reserve would engage in a third round of large-scale bond purchases, dubbed QE3, to help the sluggish economy.

A separate report from the Philadelphia Federal Reserve also signaled business contraction in the U.S. Mid-Atlantic region in August, though it was milder than in July.

"The latest uptick in copper is due to the data from the U.S. and a somewhat weaker U.S. dollar that is giving support to prices," said Daniel Briesemann, analyst at Commerzbank.

"But the recent ranges will likely hold as I don't see any indicators that could push copper outside of its current trading range."

Copper has lost around 27 percent from last February's record level of $10,190 a tonne and over $4.50 per lb. Prices in London have been stuck in a trading range of between $7,300 and $7,600 since July 20.

Expectations for economic stimulus in China grew after Premier Wen Jiabao said the country, which accounts for 40 percent of the world's copper demand, still faced headwinds despite cooling inflation.

Those expectations got another boost after China's Commerce Ministry said foreign direct investment had fallen for January-July versus a year earlier and that the trade outlook for 2012 was worsening.

David Wilson, analyst at Citi, said the market was firmer on expectations that there will be easing measures from China, but said rising food inflation would remove some of the scope for significant easing and that the political timing was sensitive, with a new premier set to take over in April.

Sluggish U.S. growth in the second quarter, undermined by the euro zone crisis, has also raised hopes the U.S. Federal Reserve will take further quantitative easing (QE) steps.

But recent U.S. data has pointed to a recovery in the third quarter, dimming prospects of further QE.

"Trying to bet on the outcome of policy decision-making is difficult. Over the last few times there have been Fed meetings, there has been a slight run-up in (metals) prices on hopes for QE, only to be disappointed," Wilson said.

"I think we're going to be set for the same again."

Officials at the Fed are due to meet on September 12-13, and a speech by Chairman Ben Bernanke at the central bank's high-profile gathering in Jackson Hole, Wyoming, in late August could offer clues on the near-term course of monetary policy.

BUCKING THE TREND

LME zinc bucked the slightly firmer tone in the base metals, ending off $17.50 at $1,784.50 a tonne on pressure from overproduction and weak demand. China's steel association said steel prices would remain weak in the coming months due to a supply glut.

LME data also showed 22,700 tonnes of zinc being delivered into Johor in Malaysia, but traders said this was common near the LME's prompt date on the third Wednesday of the month.

In aluminum, technical charts pointed to downward pressure for prices despite talk of production closures and steady physical premiums, particularly in China, investment bank RBC Capital Markets said in a note.

Three-month aluminium closed up $3 at $1,842 a tonne.

"The market looks vulnerable," ANZ said. "Downside support is around $1,830 and we see risks of a failure and slide to below $1,800 in the over supplied market."

LME aluminium is down by more than a fifth from a year high in March, prompting Chinese manufacturing plants and merchants to increase purchases of spot primary aluminium.

(Additional reporting by Harpreet Bhal in London and Carrie Ho in Shanghai; editing by Nina Chestney and Marguerita Choy)