Copper off 2-month low, cautious ahead of U.S. vote

LONDON Tue Nov 6, 2012 12:40pm EST

LONDON (Reuters) - Copper rose slightly on Tuesday, recovering from a two-month low hit the previous session, as the lower price triggered new buying, but gains were capped by uncertainty ahead of the presidential election in the United States.

Benchmark London Metal Exchange copper closed at $7,700 a tonne from a close of $7,650 on Monday, when the metal hit a two-month low at $7,596.

World stock markets rose on Tuesday as American voters went to the polls, with the tightly fought U.S. presidential election keeping trade subdued, while the euro held steady despite uncertainty over Greece's next financial aid payment.

A leadership transition in China and strikes in Greece 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 be sustained for it's difficult to say," Societe Generale analyst Robin Bhar said.

Copper prices rallied nearly 8 percent in September, fuelled by a 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. It is now trading up just 1 percent in the year to date.

LOW DEMAND, HIGH STOCKS

Spot copper prices in China traded at a discount to the Shanghai Futures Exchange front-month futures prices, indicating slow restocking by the world's top consumer.

Most of China's copper inventories are in bonded warehouses, estimated to hold around 750,000 tonnes as compared with over 300,000 tonnes at the end of 2011, but Beijing is expected to stimulate China's economy through infrastructure investments.

The country is expected to soon resume stockpiling of some base metals, including copper and aluminum, buying them from domestic smelters hurt by weak demand.

Three-month aluminum, untraded at the close, was bid at $1,920 tonne from $1,906 at the close on Monday.

Three-month nickel closed at $16,075 from $15,900, zinc at $1,899 from $1,869, tin at $20,625 from $20,100 and lead at $2,165 from $2,127.

(Additional reporting by Carrie Ho in Shanghai, Editing by Alison Birrane and Jane Baird)

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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