Copper off two-month low, cautious ahead of U.S. vote
LONDON (Reuters) - Copper rose slightly on Tuesday, recovering from a two-month low hit the previous session, as a lower price triggered some new buying but gains were capped by uncertainty ahead of a presidential election in the United States.
Benchmark copper traded at $7,670 a tonne in official rings, up from a close of $7,650 on Monday, when the metals hit a two-month low at $7,596.
Caution was evident across all financial markets, with oil, gold, the dollar and world shares trading steady as traders awaited the results of the tightly fought U.S. presidential election.
Worries about a fiscal cliff in the U.S., an upcoming leadership transition in China and Greece's strike over a new austerity package also kept sentiment in check.
Lending a little support to metals prices, data on Monday showed that the HSBC Purchasing Managers Index for China's services sector slipped in October from September's four-month high but remained above the 50-point level that indicates accelerating growth.
"We had the China PMI back slightly above 50 level and that, in combination with an oversold market and some position squaring ahead of the U.S. election caused a bit of a push higher. How long it will sustained for it's difficult to say," Societe Generale analyst Robin Bhar said.
"But markets are like a drug addict: they become used to the printing of money policies of every government, including the U.S. and every good economic data just calls into question how long the Fed will continue with its quantitative easing."
Copper prices rallied nearly 8 percent in September, fuelled by the third round of quantitative easing (QE) by the U.S. Federal Reserve, the promise of bond buying by the European Central Bank (ECB) and stimulus measures in Japan and China.
The metal then lost more than 5 percent in October as expectations that real demand would improve failed to materialize and it is now trading up just 1 percent in the year to date.
LOW DEMAND, HIGH STOCKS
Spot copper prices in China were trading at a discount to the Shanghai Futures Exchange front-month futures prices, indicating slow restocking by the world's top consumer.
Head of Macquarie China Commodities Research Bonnie Liu said copper orders in China were almost flat in the fourth quarter from the third quarter, with no big recovery seen yet.
Most of China's copper inventories are in bonded warehouses, estimated to hold around 750,000 tonnes of the industrial metal as compared with over 300,000 tonnes at the end of 2011, she noted, but added that Beijing is expected to stimulate China's economy through infrastructure investments.
"Physical demand in China is still at a pretty low level and even if it does begin to pick up it might not have that much of an impact because, as we know, there are a lot of stocks available so they could be drawn down before we see any effect on the Chinese import levels," Bhar said.
Three-month aluminum traded at $1,913 per tonne, up from $1,906 at the close on Monday, and nickel at $16,010 from $15,900.
Three-month zinc, was untraded in rings but was bid at $1,881.50 from $1,869 at the close on Monday.
Tin traded at $20,695 from $20,100 and lead at $2,158 from $2,127.
(Additional reporting by Carrie Ho in Shanghai, Editing by Alison Birrane)
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