METALS-Copper falls on dollar rise, worry over US and euro zone

Fri Nov 16, 2012 1:52pm EST

* Dollar firms on safe-haven flows, euro falls
    * U.S. prepares for budget, tax talks

    By Susan Thomas and Silvia Antonioli
    LONDON, Nov 16 (Reuters) - Copper fell on Friday as the dollar rose and
investors grew more cautious due to worries about U.S. budget problems and the
euro zone debt crisis, but losses were limited by signs the slowdown in top
metals consumer China might have bottomed out.
    Equities markets also fell, with European shares down for a third day and
U.S. stock index futures pointing to a lower open. 
    Three-month copper on the London Metal Exchange closed at $7,605 a
tonne, down from $7,639.50 at Thursday's close.
    "Equities markets are weak in China, Europe and U.S. and the euro is also
under pressure, and those exogenous factors are really weighing on the base
metals," Standard Bank analyst Leon Westgate said.
    "The macro economic data in China suggests the economy is stabilizing, but
that is yet to feed through to more concrete signs."
    China, the biggest consumer of copper, announced at the weekend that its
economy was turning the corner and was likely to meet its growth target for the
year. 
    A pick-up in growth from China would provide welcome news in the West, where
industrialised economies are struggling following the debts built up during the
global financial crisis.
    But bulging metal inventories in China, expectations of a modest rise at
best in demand next year and improving supply signal a slow recovery. 
    "The markets are coming to terms with the fact that it is going to be a
steady and slower recovery in growth (in China) compared to what we have seen
previously," said Barclays analyst Gayle Berry.
    "The inventory overhang there is going to delay the feeling of the demand
recovery. Even though we have started to see some improvement in economic data,
it is going to be a delayed effect on demand as those inventories are being
drawn down."
    The country's state stockpiler this week also bought aluminium and zinc from
domestic smelters in a bid to aid local industry, in a move that analysts say
will have little impact on a market dogged by oversupply but that may boost
sentiment.
    
    U.S. BUDGET
    In the United States, Federal Reserve Chairman Ben Bernanke highlighted
lingering weakness in the housing market, a key component of the economic
recovery. Construction is a significant market for copper with a little over 400
lb of copper used in a typical U.S. house.
    Investors were also nervous about the start of budget talks in the United
States, fearing a stand-off in negotiations to avoid some of the $600 billion of
spending cuts and tax hikes that are set to kick in Jan. 1. 
    The risk-off mood prompted safe-haven flows into the dollar, which rose to
its highest in two months against a basket of currencies. A stronger
dollar makes commodities priced in the currency more expensive for holders of
other currencies.
    The euro fell versus the dollar on recent dismal economic data out of the
euro zone.
    In other metals, three-month aluminium closed at $1,951 per tonne
from $1,964 at the close on Thursday, zinc finished at $1,920 a tonne
from $1,955 and lead at $2,150 from $2,199.
    Tin closed at $20,400 from $20,475 and stainless steel material
nickel at $15,955 from $15,910.
    "The metals complex looks to be comfortable, though sitting in between a few
of the near-term moving averages," RBC said in a research note.
    "This range trading is likely to continue as we look to next week's holiday
sessions toward the end of the week. With volume looking to dry up Wednesday
through Friday for American Thanksgiving, we expect the conditions to add to
volatility but do not expect much overall price movement."
    
 Metal Prices at 1850 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       344.65       -1.60     -0.46     344.75     -0.03
  LME Alum      1951.25      -12.75     -0.65    2020.00     -3.40
  LME Cu        7611.25      -28.25     -0.37    7600.00      0.15
  LME Lead      2161.25      -37.75     -1.72    2034.00      6.26
  LME Nickel   15981.00       71.00     +0.45   18650.00    -14.31
  LME Tin      20371.00     -104.00     -0.51   19200.00      6.10
  LME Zinc      1927.25      -27.75     -1.42    1845.00      4.46
  SHFE Alu     15425.00      -15.00     -0.10   15845.00     -2.65
  SHFE Cu*     55740.00     -100.00     -0.18   55360.00      0.69
  SHFE Zin     15040.00      -70.00     -0.46   14795.00      1.66
 ** 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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