METALS-Copper rises on U.S. and European data, China a worry

Wed Jul 24, 2013 12:40pm EDT

* U.S. home sales hit 5-year high

* Euro zone factories boost output for first time in a year

* China flash PMI drops to 11-month low in July

* China rolls out measures to address aluminium overcapacity

By Susan Thomas and Eric Onstad

LONDON, July 24 (Reuters) - Copper rose on Wednesday, the fifth session of modest gains, after upbeat economic data from the United States and the euro zone, but gains were capped by signs that China's economy is stalling.

Data from the world's biggest economy showed U.S. new home sales hit a five-year high in June and manufacturers increased output in July at the fastest rate in four months.

By contrast, manufacturing in China, the world's biggest consumer of copper, lost momentum in July and its job market weakened.

Three-month copper on the London Metal Exchange closed 0.2 percent higher at $7,055 a tonne after earlier reaching a session high of $7,119, its loftiest since June 18.

The price of the metal used in power and construction initially fell after the release of the Chinese data in early trading but bounced back later as the euro zone and U.S. data was released.

Copper has rebounded from a low of $6,602 a tonne touched on June 25, the weakest in nearly three years, but it is still down nearly 11 percent so far this year.

"The U.S. data was supportive, especially today in thin volumes and when you don't have much to trade on, but we can't justify a sustained pick-up without a significant recovery in China," said analyst Andrey Kryuchenkov at VTB Capital in London.

"We don't see any pick-up in Chinese industrial growth and we also still have a massive gap between lending and fixed asset investment."

The dollar was having a mixed impact: it was slightly weaker against the euro for much of the day, which makes commodities priced in the unit more affordable for holders of the European single currency.

This was in part due to data showing euro zone private industry unexpectedly bounced back to growth this month as factories increased output for the first time in well over a year.

The dollar, however, was stronger against a broad basket of currencies .

In the last 10 days, the correlation of copper to the dollar was 93 percent, analyst George Adcock at broker Marex Spectron said.

In other metals, LME aluminium ended up 0.3 percent at $1,851 a tonne.

China rolled out stricter controls for its aluminium sector to tackle overcapacity and push for consolidation and restructuring. These included a ban on the construction of new smelting plants in environmentally sensitive zones.

The best performer was nickel which ended the day 1.6 percent stronger at $14,360 a tonne.

Zinc edged 0.1 percent lower to $1,885 by the close, while lead added 0.5 percent to $2,065 and tin rose 0.3 percent to $19,505.

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