Copper ends down as investors await central bank action
NEW YORK/SHANGHAI (Reuters) - New York copper futures ended lower in holiday-thin business on Monday, pausing from last week's near 2-percent climb as investors sought more clarity about central bankers' efforts to help stimulate global growth and metals demand.
Copper's pause reflected a more cautious stance this week from the broader market, with the focus squarely set on a meeting of central bankers at Jackson Hole, Wyoming, on Friday for clarity on what the Federal Reserve will do to further stimulate the economy.
Investors are also trying to assess how the European Central Bank (ECB) will tackle the bloc's credit crisis and what China intends to do to keep its rate of growth above the government's 7.5 percent goal.
"In the short term, everybody is awaiting Bernanke's speech Friday in Jackson Hole to see what the Fed intends to do ... maybe we'll see some type of coordinated central bank action, but there's a lot things up in the air," said Matthew Zeman, head of trading with Kingsview Financial in Chicago.
"The markets right now are looking for some more clarity on what the plan is before they decide which way they want to go."
COMEX copper for September delivery ended down 0.70 cent at $3.4765 per lb after failing to sustain early gains through the 100-day moving average above $3.49. The session range was $3.4630 to $3.5060.
With the London Metal Exchange (LME) closed for a bank holiday in the UK, COMEX volumes pushed above 51,500 lots in late New York trade -- more than 15 percent above the 30-day average, according to preliminary Thomson Reuters data.
The New York session failed to build on overnight gains in Asia where the prospect of more Chinese stimulus action helped lift the most-active December copper contract on the Shanghai Futures Exchange by 0.4 percent to 55,840 yuan ($8,800) per tonne.
China should ready plans to respond to near-term risks in an economy facing significant downward pressure but keep the broad policy focus on longer-term structural adjustments, the official People's Daily said in a front page editorial on Friday, suggesting that Beijing has not ruled out more imminent stimulus policies.
Reflecting the prospects of central bank action, data on Friday showed money managers and other large speculators cut their bearish bets in U.S. copper futures by 7,551 contracts to 3,224 contracts in the week ended August 21.
In the physical copper market, there has been a pick-up in spot purchases in China with investors encouraged by news that the country's third-biggest smelter, Jinchuan Group, has plans to buy up to 150,000 tonnes of the metal through its trading unit by the end of September.
The trend may push the arbitrage window open, making it profitable for Chinese buyers to import copper based on LME prices.
Traders have also reported more spot buying in China as investors expected large Chinese smelters to export more copper, based on a new tolling tax incentive.
"Many smelters have been buying domestic copper to fulfill their local contracts as the high prices of LME copper over Shanghai copper is pushing up their imported copper concentrate costs, further squeezing their profit margins," said one Shanghai-based trader.
Jiangxi Copper Co Ltd (600362.SS)(0358.HK), the top producer of the metal in China, has also set up a wholly owned subsidiary in Hong Kong to reduce financing costs for imports and potential acquisitions, company spokesman Pan Qifang said on Thursday.
($1 = 6.3545 Chinese yuan)
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