REFILE-METALS-Copper rallies on reports of ECB bond purchase plan

Wed Sep 5, 2012 3:38pm EDT

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(Refiles to fix spelling of Wednesday in paragraph 1)
    * ECB may buy unlimited amount of government debt
    * Copper closes above 100-day moving average
    * China adds to budget for infrastructure spending
    * Investors hang hopes on U.S., China stimulus
    * Coming up: ECB meeting Thursday

    By Chris Kelly and Eric Onstad
    NEW YORK/LONDON, Sept 5 (Reuters) - Copper jumped on Wednesday to its
priciest in more than a month, on reports that the European Central Bank will
unveil a new government bond-buying program to control the euro zone debt
crisis.
    As the euro rallied versus the dollar, copper surged and closed above its
100-day moving average for the first time since May after reports suggested the
ECB may buy unlimited amounts of short-term government debt to ease the region's
 financial crisis. 
    The ECB said in August it would start buying Spanish and Italian government
bonds again to ease pressure on those countries' borrowing costs, but only if
they sought help from the euro zone's rescue fund and met strict conditions
    "This (news) is further supporting the markets' earlier hopes that there may
be a ray of light on the horizon for Europe," said Peter Buchanan, commodities
analyst and senior economist at CIBC in Toronto.
    COMEX copper for December delivery rose 6.00 cents or 1.7 percent to
settle at $3.5290 per lb, after dealing between $3.4465 and $3.5340, its highest
since July 20.
    Copper closed above its 100-day moving average for the first time since
early May and pushed up near the top of a month's long trading range, roughly
between $3.30 and $3.55.
    "The close above the $3.50-$3.51 area is indeed a positive for the bull
camp. Follow-through from today's move would confirm a breakout from the
market's range," said Ralph Preston, futures analyst with
HeritageWestFutures.com in San Diego, California.
    COMEX volumes neared 64,000 lots in late New York business, more than 40
percent above the 30-day norm, according to preliminary Thomson Reuters data.
    At the London Metal Exchange (LME), three-month copper climbed $105
to close at $7,740 a tonne, just shy of an intra-day peak at $7,750 -- another
high dating back to July 20.
    "The markets have been pumped up on the belief that the ECB will announce at
its meeting tomorrow that it will restart its bond buying program to address the
spike in borrowing cost in some of the weaker euro zone countries," Societe
Generale analyst Robin Bhar said.
    The ECB could start to buy Portuguese bonds quickly after revealing its
anti-crisis plan on Thursday. 
    "Expectations are very high regarding not only the ECB, but also the Fed and
perhaps to a lesser extent, the People's Bank of China," CIBC's Buchanan said.
    Stimulus measures or monetary easing intended to relaunch economic growth
would strongly benefit industrial metals demand growth, which has recently
slowed down together with industrial activity in most regions.
    A survey published on Wednesday showed the euro zone is likely to have
slipped back into recession in the current quarter as the bloc's private sector
suffered a seventh month of contraction as new orders dwindled. 
    
    CHINA
    Investors also hoped China, which accounts for about 40 percent of global
copper demand, would attack slowing growth with aggressive stimulus measures.
    So far there have been moderate measures, including announcements this week
about infrastructure spending, notably from the Ministry of Railroads.
    
    A forecast deficit in copper supply this year however was supporting the
metal price.
    "Things are cooling down in China but we're still expecting demand growth of
5 percent for copper, in part due to the roll-out of electricity projects. We
are expecting copper to outperform other metals over the next six months," said
Matt Fusarelli, an analyst at Australia-based consultancy AME Group.
    A trader in China's Guangzhou province said anticipation of further easing
by Beijing had been supporting domestic prices. However, the trader said he saw
copper prices falling as strong U.S. equities attracted investors and Chinese
industrial demand growth moderated.        

 Metal Prices at 1747 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       352.15        5.25     +1.51     343.60      2.49
  LME Alum      1972.00       45.00     +2.34    2020.00     -2.38
  LME Cu        7735.00      100.00     +1.31    7600.00      1.78
  LME Lead      2028.00       33.00     +1.65    2035.00     -0.34
  LME Nickel   16095.00      180.00     +1.13   18710.00    -13.98
  LME Tin      19700.00      -50.00     -0.25   19200.00      2.60
  LME Zinc      1890.00       15.00     +0.80    1845.00      2.44
  SHFE Alu     15500.00       10.00     +0.06   15845.00     -2.18
  SHFE Cu*     55780.00     -300.00     -0.53   55360.00      0.76
  SHFE Zin     14785.00      -40.00     -0.27   14795.00     -0.07
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
 
 (Additional reporting by Silvia Antonioli; Editing by Jason Neely and David
Gregorio)
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