METALS-Copper hits 2-month low as U.S. election, China in focus

Mon Nov 5, 2012 12:28pm EST

* Investors wait for Tuesday's U.S. election
    * Indonesia court scraps mineral export ban -industry body
    * China services sector data weaker than expected

    By Susan Thomas and Silvia Antonioli
    LONDON, Nov 5 (Reuters) - Copper hit two-month lows on Monday as the U.S.
presidential election, a leadership transition in China and two central bank
meetings this week kept risk-prone investors on the sidelines of financial
markets.
    Victory in Tuesday's U.S. election for Republican contender Mitt Romney
would pave the way for more deregulation and tax cuts, while a second term for
President Barack Obama would probably bring bigger public investment in
education, research and infrastructure, most analysts say. 
    "From a sentiment point of view and fundamental perspective, I think
investors will wait and see what happens with the election. It looks like that
is going to be quite a close call," said Barclays analyst Gayle Berry. 
    "That's the nearest thing in the horizon that might spark something in
either direction (on metals prices)." 
    China's once-a-decade leadership transition event, the 18th Communist Party
Congress, is scheduled to start on Thursday, a day that the European Central
Bank and the Bank of England also will hold policy meetings. 
    Three-month copper on the London Metal Exchange closed at 7,650 per
tonne, 0.2 down from its close at $7,665.50 on Friday. 
    The metal used in power and construction, had hit a session low of $7,596,
its lowest since Sept. 5. 
    "We find that close U.S. presidential election results typically deliver
positive gains for the S&P500, while an incumbent remaining in power has
tended to be constructive for the U.S. dollar," Deutsche Bank said in a research
note.
    The dollar was broadly firmer, which usually has a negative effect on
dollar-priced metals because it makes them more expensive for holders of other
currencies.  
    "In terms of China, we suspect initiatives to boost growth will come later
than the financial market would like, and this will sustain the shaky
foundations to price support across the industrial metals complex," Deutsche
Bank said.
    An announcement by China's central bank in its latest policy report that it
would prioritise supporting the economy above other needs only served to affirm
expectations that recovery in the Chinese growth engine is feeble at best. China
is the world's largest consumer of copper, used extensively in construction and
power. 
        
    
    WEAK CONSUMER DEMAND
    A private survey of China's growing services sector slipped in October, with
weaker-than-expected new orders injecting a note of caution after three previous
manufacturing surveys for October showed the world's second largest economy
regaining momentum. 
    The HSBC Purchasing Managers Index for China's services sector released on
Monday showed the index slipped to 53.5 in October from September's four-month
high of 54.3, as higher costs and greater competition squeezed margins.
    "The HSBC figures weren't particularly brilliant and Asian markets were
generally subdued as a result of the twin effects of the U.S. election and the
Chinese leadership change so generally the market has been very much on the
defensive," a London-based trader said.   
     "There is uncertainty around what is going to happen next and the euro is
falling, and in the absence of any other stimulus the market is just drifting a
bit weaker. It is a bit oversold down at this sort of numbers but there is no
real investment coming into the market right now."    
    Also denting sentiment were copper stocks in Shanghai Futures
Exchange-monitored warehouses, which were at a six-month high at 197,937 tonnes
on Friday, after rising 31 percent since Sept. 7. 
     Three-month aluminium closed at $1,906 per tonne in rings from
$1,925 at the close on Friday, and nickel at $15,900 from $15,970.
    The two metals were pressured by a decision by the Indonesian supreme court
to scrap a May 6 government ban on the export of unprocessed minerals, including
nickel ores and bauxite. 
    Three-month zinc finished at $1,869 from $1,874 at the close on
Friday, while tin ended at $20,100 from $20,160 and lead at
$2,127 from $2,095.
    
 Metal Prices at 1618 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       347.25       -0.90     -0.26     344.75      0.73
  LME Alum      1909.50      -15.50     -0.81    2020.00     -5.47
  LME Cu        7652.25      -13.25     -0.17    7600.00      0.69
  LME Lead      2128.50       33.50     +1.60    2034.00      4.65
  LME Nickel   15933.00      -37.00     -0.23   18650.00    -14.57
  LME Tin      20150.00      -10.00     -0.05   19200.00      4.95
  LME Zinc      1869.00       -5.00     -0.27    1845.00      1.30
  SHFE Alu     15290.00      -70.00     -0.46   15845.00     -3.50
  SHFE Cu*     55820.00     -790.00     -1.40   55360.00      0.83
  SHFE Zin     14730.00     -110.00     -0.74   14795.00     -0.44
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
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