Copper up after U.S. housing data, EU woes nag

LONDON Wed Oct 17, 2012 12:42pm EDT

LONDON (Reuters) - Copper rose on Wednesday on a stronger euro and surprisingly good housing data in the U.S., though gains were limited by worries about forthcoming growth data in China and doubts over whether a European summit will make progress in resolving the euro zone's debt crisis.

Three-month copper on the London Metal Exchange ended up 1.17 percent to $8,220 a tonne, having hit an intraday high of $8,233.

The market, sapped of liquidity during LME Week when many participants are in meetings and attending receptions, has tested the bottom of its recent range of about $8,100 to $8400 over the past few days.

The euro hit a one-month high against the U.S. dollar on Wednesday, lifted by Moody's rating agency affirming Spain's investment grade rating and growing speculation Madrid will ask for a bailout next month. <FRX/>

A strong euro makes dollar-priced metals cheaper for European and other non-U.S. investors.

Also helping underpin the metal was data showing groundbreaking on new U.S. homes surged in September to its fastest pace in more than four years.

"The U.S. economy is showing good signs of stabilization. There's big expectations about what China could do, but the market is now turning more to European developments. China is slowing but it's also because of the European situation," said Gianclaudio Torlizzi, partner at metals consultancy T-Commodity.

A two-day European Union summit, which may focus attention on disputes over closer fiscal union as a long-term solution to the euro zone crisis, starts on Thursday.

"I'm not sure we're any closer to any sort of agreement and with the lower interest rates on peripheral debt across Europe, the incentive to do something now is reduced," said Nic Brown, head of commodities research at Natixis in London.

"It's all simmering along... but it would certainly be a step forward if Spain did move to request assistance."

Ratings agency Moody's affirmed Spain's investment grade status late on Tuesday as expectations grow that Madrid will shortly request euro zone aid, potentially allowing the European Central Bank to begin buying its bonds.

WORRY ABOUT CHINA GDP

In China, the most active January copper contract on the Shanghai Futures Exchange fell 0.2 percent to close at 58,660 yuan ($9,400) per tonne.

"Shanghai base metals have resisted rising... there has been a feeling of uncertainty in China ahead of GDP figures tomorrow and the 18th Communist Party Congress, which made investors more inclined to sell today," the trader added.

Economists polled by Reuters indicated China's annual economic growth probably slowed for a seventh straight quarter in the July-September period to expand 7.4 percent, the weakest level since the depths of the global financial crisis.

In the physical markets, traders said spot copper demand was still lackluster, with the day's spot-to-front-month discount doubling from Tuesday to as high as 200 yuan.

Also weighing on copper were indications that the copper market would be better supplied next year from annual talks about premiums and treatment and refining charges (TC/RCs), Brown said.

The TC/RCs are expected to rise moderately to around $70 per tonne and 7 cents per pound and premiums to fall by about $5 a tonne.

"That's a sign that the copper market is a little bit better supplied with ores and concentrates going forward, that the market is not quite as tight as has been over the past year," Brown said.

In other metals traded, three-month aluminum closed up 1.64 percent to $1,989 per tonne. Stocks data showed a large fresh net cancellation of 63,550 tonnes in Antwerp.

Broker Marex Spectron noted tightness in aluminum December futures, with December at a premium of $2.15 over the three-month contract.

Galvanizing metal zinc ended up 1.21 percent to $1,921 a tonne and battery material lead added 1.99 percent to $2,155.

Tin closed at $21,570 a tonne, up 0.33 percent from Tuesday's close, and stainless steel ingredient nickel ended up 1.48 percent to $17,180 a tonne.

($1 = 6.2640 Chinese yuan)

(Additional reporting by Carrie Ho; editing by James Jukwey and Keiron Henderson)

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