METALS-Copper hits week high as Fed expected to prolong stimulus

Wed Oct 30, 2013 1:45pm EDT

* Fed's bond buying seen extending to March

* China may increase term bookings of copper imports in '14

* China aluminium output seen at record this year - Chalco

By Harpreet Bhal

LONDON, Oct 30 (Reuters) - Copper rose to its highest level in a week on Wednesday, boosted by expectations the U.S. Federal Reserve will prolong its stimulus programme to aid recovery in the world's largest economy.

Benchmark copper on the London Metal Exchange ended up more than 1 percent at $7,298 a tonne, from a close of $7,200 on Tuesday, but off a peak of $7,299.50 a tonne hit earlier, its highest since Oct. 23.

LME aluminium was last bid at $1,892 a tonne, up from Tuesday's close at $1,883, having earlier climbed to $1,898, not far from a two-month high of $1,905.75 hit in the previous session.

The Fed was expected to preserve its monthly bond-buying campaign when it concludes a two-day meeting later in the day and to point to softer readings on the U.S. economy to signal that the policy will be extended into 2014.

The Fed was due to announce its decision at 1800 GMT.

A private sector U.S. jobs report out earlier showed U.S. companies hired 130,000 workers this month, below the 150,000 forecast by economists polled by Reuters. The number added weight to expectations that the Fed's support for the economy is needed.

"If the Fed keeps the patient on tapering medicine for longer, this could be good news for copper, and we could see the metal breaking its resistance of $7,334," said Naeem Aslam, chief market analyst at Ava Trade.

Ultra-loose monetary policy around the world in the past few years has drawn investors to commodities as an alternative to interest-bearing assets.

The dollar fell against a basket of major world currencies, having hit a nine-month low on Friday amid expectations of a Fed tapering delay. A weak dollar makes metals priced in dollars cheaper for non-U.S. investors.

"We suspect that investors will likely move to the sidelines ahead of the (Fed) policy statement. However, once this is over, we suspect that metals will likely resume their push higher, as the weaker dollar and an accommodative Fed both lend support," said INTL FCStone analyst Ed Meir.

In the euro zone, data signalled a recovery in Europe was strengthening. Confidence in the region's economy improved more than expected in October, driven by more optimism in industry, while the business climate indicator rallied to an 18-month high.

In a bright spot for the demand outlook, Chinese firms may increase term bookings of refined copper imports in 2014, despite a forecast jump in premiums, because they are becoming more confident on the economic outlook and demand for copper as a financing tool remains strong.

China is the world's largest copper consumer, accounting for around 40 percent of global refined demand.

Importers and traders at a copper conference in Kunming organised by state-backed research firm Antaike said they were optimistic that China's economy had bottomed.

Antaike said China's consumption of refined copper would grow more quickly in 2014, though not fast enough to boost imports significantly as its production increases at an even faster pace.

In aluminium, Chinese output is likely to hit a record 24 million tonnes this year, a research director at the country's top producer of the metal said, suggesting production may ramp up towards year-end.

In other metals traded, zinc was last bid up 0.10 percent at $1,969 a tonne, lead ended up 0.18 percent at $2,209 a tonne, tin ended down 0.19 percent at $23,125 a tonne, and nickel ended up 0.99 percent at $14,750 a tonne.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin

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