SINGAPORE London copper edged lower on Tuesday on signs of flagging growth in top metals consumer China, though prices were supported by enduring hopes the European Central Bank (ECB) will this week kick off a round of global easing.
At an ECB meeting on Thursday, President Mario Draghi is widely expected to announce steps to support borrowing costs for struggling European nations. He told European lawmakers on Monday that purchases of short term sovereign bonds by the ECB would not breach European Union rules.
"If (the ECB) came out with something that was pretty concrete - that they were going to buy bonds - then that would be a big trigger that people would get pretty bulled up on ... but equally if they don't do too much of anything, it could pile on some more pressure," said Credit Suisse metals analyst Ivan Szpakowski.
He added that expectations were growing that the People's Bank of China (PBOC) would need to take more decisive action to spur growth, helping to support metals.
"As for the PBOC ... expectations are that they'll get more aggressive, maybe another RRR cut or even a rate cut, but I don't see anything in terms of major policy changes ahead of the leadership changeover in October."
Three-month copper on the London Metal Exchange was trading at $7,655.50 a ton by 11:37 pm EDT, dropping 0.29 percent and reversing gains logged the previous session, when it hit a one-week high of $7,700.
Prices are reaching the top of a range held since late July, with a break above $7,720, the August23 peak, likely to spark further chart-based buying.
The most-traded December copper contract on the Shanghai Futures Exchange slipped 0.30 percent to 56,010 yuan ($8,800) a tonne. It earlier matched its August peak of 56,390 yuan, a break above which would open the way to mid-May highs.
In other markets supporting metals, the euro held its ground against the dollar even after Moody's Investors Service changed the outlook on its EU rating to negative.
A weaker dollar makes commodities cheaper for holders of other currencies.
Highlighting the deepening slowdown in China's demand for commodities, Australia's Fortescue Metals Group (FMG.AX) on Tuesday slashed capital spending by about a quarter and cut its expansion schedule for iron ore production.
China's vast manufacturing sector has been badly hit by slowing new orders, two complementary surveys showed in recent days, a sign that the pace of growth in the world's second-largest economy will weaken well into the third quarter.
Still, traders said there was some evidence of seasonal buying from consumers with low stocks such as cable makers, with China beginning a week of holidays on Oct 1. <HOL/DIARY>
"Inside China certainly the market is getting better; seasonality does play a part here. Consumer inventory levels are still quite low," a Shanghai-based trader at a Western bank said.
"I don't see anyone making any strategic inventory buys, but manufacturers have to stock up ahead of the long holiday in China next month."
Base metals prices at 0337 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7655.50 -22.50 -0.29 0.73
SHFE CU FUT DEC2 56010 -170 -0.30 1.17
HG COPPER DEC2 348.15 2.45 +0.71 1.32
LME Alum 1920.00 -7.00 -0.36 -4.95
SHFE AL FUT DEC2 15455 30 +0.19 -2.46
LME Zinc 1864.00 -11.00 -0.59 1.03
SHFE ZN FUT DEC2 14820 -20 -0.13 0.17
LME Nickel 16205.00 -15.00 -0.09 -13.39
LME Lead 1988.00 -11.00 -0.55 -2.31
SHFE PB FUT 15200.00 0.00 +0.00 -0.56
LME Tin 19669.00 -81.00 -0.41 2.44
LME/Shanghai arb^ 726
Shanghai and COMEX contracts show most active months
($1 = 6.3407 Chinese yuan)
(Reporting by Melanie Burton; Editing by Joseph Radford)