* Barclays suggests shorting base metals if rally continues
* Copper, aluminium fundamentals weak
* U.S. data upbeat; Nov retails sales up, jobless claims fall
By Silvia Antonioli and Stephen Eisenhammer
LONDON, Dec 13 Copper fell on Thursday as an impasse in U.S.
budget talks showed little sign of being resolved and a Federal Reserve decision
to tie its monetary policy to unemployment raised concerns that its economic
stimulus might be limited.
Benchmark copper on the London Metal Exchange closed down 0.7
percent at $8,074 a tonne from a last bid of $8,130 at the close on Wednesday,
when it edged up 0.3 percent.
Sharp differences remained between congressional Republicans and the White
House in negotiations to avoid the "fiscal cliff" of steep tax hikes and budget
cuts. A failure to strike a deal could send the world's largest economy back
into recession, with negative implications for metals demand.
Some investors were also worried by the Fed's decision to link its monetary
stimulus to unemployment and inflation numbers, which could limit the length of
The Fed said it planned to buy $45 billion in longer-term Treasuries each
month on top of its $40 billion monthly purchase of mortgage-backed securities
as expected, but set unemployment and inflation thresholds for its exit
"The Fed has given some conditions, and this has scared the market a bit.
But in my opinion, the losses in metals have more to do with uncertainty on the
fiscal front than with disappointment on monetary easing," T-commodity
consultant Gianclaudio Torlizzi said.
"After the gains in metal recently, some investors are also closing their
positions and taking profit, worried that if a fiscal agreement is not found,
higher taxes could hit capital gains, too."
Volume was thin with 12,800 lots of copper traded by the kerb close, 18
percent lower than the average volume over the past 30 days.
U.S. data on Thursday was upbeat, showing retail sales rose in November and
jobless claims fell sharply last week, but metals markets largely shrugged off
the news. [ID:nL1E8NCFE7}
Copper prices have risen more than 7 percent in the past month, and the
metal is now up by more than 6 percent on the year.
Prospects for the euro zone got a boost as the European Union reached a
landmark deal to make the European Central Bank the bloc's top banking
The deal is a crucial step towards a European banking union. German
Chancellor Angela Merkel said, "The importance of the deal cannot be assessed
In industry news, the CEO of Aurubis, Europe's biggest copper
smelter, said he expected China to post economic growth and growing copper
demand in 2013, despite recent reports of an economic slowdown in the world's
largest metal importer.
Barclays suggested shorting base metals should the rally seen in the last
month continue, given that fundamentals remain weak especially for aluminium and
"Aluminium fundamentals are the weakest for any base metal at present, but
price volatility tends to be quite low. Instead, we recommend shorting copper if
cash prices rise much above $8,500," it said in a research report.
"A large stock overhang in China means its import demand will likely be
sharply down on year-ago levels, and following the recent abolition of export
taxes on tolled copper, there could be a steady stream of exports early next
year, which could turn market sentiment very negative."
Aluminium closed down 0.6 percent at $2,126 a tonne and battery
material lead shed 0.8 percent to finish at $2,303.
Neither zinc or tin traded at the close. Zinc, used to galvanise
steel, was bid at $2,073 a tonne, down 1.0 percent, and tin was bid at
$22,975, down 0.7 percent from Wednesday.
Stainless steel material nickel closed unchanged at $17,700 a tonne.