METALS-Copper dips on dollar, US budget talks anxiety

Thu Dec 6, 2012 12:30pm EST

* Traders eye U.S. jobs report, China industrial output this week
    * U.S. "fiscal cliff" negotiations worry
    * European Central Bank keeps rates on hold

    By Susan Thomas
    LONDON, Dec 6 (Reuters) - Copper fell on Thursday along with a drop in the
euro after the European Central Bank sharply downgraded its outlook for the
region's economy, and on investor anxiety over the slow progress in budget
negotiations in the United States.
    The ECB said the euro zone economy is likely to shrink next year as it has
in 2012, downgrading its outlook after holding interest rates at a record low of
0.75 percent. 
    The euro extended its decline against the dollar after comments from ECB
President Mario Draghi stoked expectations of an interest rate cut. A stronger
dollar makes metals priced in the U.S. currency more expensive for holders of
other currencies. 
    Analysts said markets would turn its focus to U.S. employment data on
Friday.
    "Base metals markets will be looking towards the non-farm payrolls tomorrow.
That is going to be instrumental in showing how the labour market is doing in
the United States, and that is important for the economy in general," Danske
Bank analyst Christin Tuxen said.
    Three-month copper on the London Metal Exchange closed at $8,000 a
tonne, reversing gains from the previous session when it hit its highest since
Oct. 19. It closed at $8,075 on Wednesday. Still, prices are up around 6 percent
so far this year.
    "We will continue to watch the Shanghai Composite Index and news regarding
the fiscal cliff as leading indicators for copper prices and whether the current
rally can be sustained," RBC said in a research note.
    With about three weeks remaining before steep tax hikes and budget cuts in
the United States that comprise the so-called fiscal cliff are set to begin, the
political discussions continued to be a key focus for investors. 
    While Republican leaders in the House of Representatives have insisted that
raising tax rates on the rich is an impossibility, some Republican lawmakers now
see it as inevitable to avoid the tax hikes and spending cuts.
    But in suggestions of a return to modest job growth, the number of Americans
filing new claims for unemployment benefits last week fell back to the
pre-superstorm Sandy range, in late October. 
    
    
    CHINA
    Metals prices had also firmed on signs demand is improving in top consumer
China, despite record stockpiles.
    China's large copper smelters are offering 2013 exports of copper at cheaper
premiums as they compete with major suppliers such as top world producer
Codelco, boosting supply in Asia, the smelters said on Thursday. 
    Annual growth in China's factory output, investment and retail sales may
have gained pace in November thanks to recent pro-growth policies, a Reuters
poll showed, reducing the chances for further policy support as inflation picks
up. 
    In other metals, tin closed at $21,900 from $21,745 at Wednesday's
close, while zinc closed at $2,030 f rom $2,027.
    Lead, untraded at the close, was bid at $2,214 from $2,239. Nickel
, also untraded, was bid at $17,175 from $17,550. Aluminium,
untraded, was offered at $2,085 from $2,105. 
  
 Metal Prices at 1718 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       363.75       -3.75     -1.02     344.75      5.51
  LME Alum      2084.75      -20.25     -0.96    2020.00      3.21
  LME Cu        7990.00      -85.00     -1.05    7600.00      5.13
  LME Lead      2212.00      -27.00     -1.21    2034.00      8.75
  LME Nickel   17188.00     -362.00     -2.06   18650.00     -7.84
  LME Tin      21730.00      -15.00     -0.07   19200.00     13.18
  LME Zinc      2022.75       -4.25     -0.21    1845.00      9.63
  SHFE Alu     15330.00      -70.00     -0.45   15845.00     -3.25
  SHFE Cu*     57340.00     -390.00     -0.68   55360.00      3.58
  SHFE Zin     15285.00      -65.00     -0.42   14795.00      3.31
 ** 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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