* China manufacturing activity may contract in Dec - poll
* Italian bond yields fall from record at auction
* U.S. housing data points to tentative recovery
By Susan Thomas
LONDON, Dec 29 Copper fell on Thursday for a
second straight day on a firm dollar, investor caution over the
euro zone sovereign debt crisis and worries about growth in big
metals consumer China.
Copper has fallen around 23 percent this year, after a 30
percent gain in 2010 and a 140 percent jump in 2009, as the euro
zone debt crisis slowed credit and prompted investors to switch to
safer assets including the U.S. dollar.
Three-month copper on the London Metal Exchange closed
at $7,425 a tonne from $7,465 on Wednesday, extending a loss of 2.4
percent from the previous session.
It went briefly into positive territory after U.S. data showing
pending sales of previously owned homes jumped to a 1-1/2 year high
in November, adding to signs of a tentative recovery in the housing
market. Copper is used extensively in building construction.
But an Italian debt sale unsettled markets.
Italian bond yields fell from recent record highs at auction on
Thursday but cautious investors still demanded a near 7 percent
yield to buy 10-year paper, a level seen unsustainable over time
for the euro zone's third-largest economy.
Analysts also doubt whether domestic progress on reform would
be enough to see Italy smoothly over its refinancing hurdles from
January to April.
"The news that continues to move the market is the EU debt
crisis," said Credit Suisse analyst Tobias Merath.
"The liquidity story is affecting base metals more than other
assets," he added, pointing to the flight out of assets perceived
as risky and the effect the economic slowdown is having on base
metals which are widely used in industry.
Euro zone banks received 489 billion euros last Friday in the
first of two opportunities to access this longer-term money -
operations the European Central Bank (ECB) hopes will encourage
banks to unclog lending to one another and then onto customers in
spite of the region's debt crisis.
But despite being awash with liquidity, banks still appear
distrustful and prefer to deposit their money at the ECB's
overnight facility rather than lend to one another.
Loans to private sector firms in the euro zone fell in
November, ECB data showed, increasing fears that the region faces a
credit crunch, an issue of growing concern for the central bank as
the worsening sovereign debt crisis makes firms and households
increasingly wary about taking on debt.
The dollar was firm against a basket of currencies as
the euro slid to a 15-month low against the dollar.
Gains in the dollar can pressure dollar-denominated commodities
by making them more expensive for consumers using other currencies.
Worries about the impact of the euro zone problems on copper
demand were compounded by evidence of slowing growth in China, the
world's top consumer of the metal.
China's manufacturing activity may contract again in December,
a poll of economists showed ahead of the official purchasing
managers index release on Jan. 1, suggesting the world's
second-largest economy is finishing 2011 on a weak note.
"Concerns remain about Europe and growth in China and we don't
see that changing before year end," RBC Base Metals said in a note
Three-month aluminium, untraded at the close, was bid
at $1,991 from $1,999 at the close on Wednesday.
Western world unwrought aluminium stocks rose to 1.456 million
tonnes in November compared with a revised 1.406 million in
October, industry data showed on Wednesday, signalling retreating
demand for the metal.
Tin, which has fallen around 44 percent since a record
$33,600 hit in April, closed at $18,800 from $18,600 .
Zinc closed at $1,832
from $1,810.5 , lead at $1,999 from
$1,960 and nickel at $18,050 from a last bid of
Metal Prices at 1700 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in
Metal Last Change Pct Move End 2010 Ytd Pct
COMEX Cu 337.60 1.20 +0.36 444.70 -24.08
LME Alum 1990.25 -8.75 -0.44 2470.00 -19.42
LME Cu 7449.25 -15.75 -0.21 9600.00 -22.40
LME Lead 1998.00 38.00 +1.94 2550.00 -21.65
LME Nickel 18154.00 -351.00 -1.90 24750.00 -26.65
LME Tin 18810.00 210.00 +1.13 26900.00 -30.07
LME Zinc 1829.50 19.00 +1.05 2454.00 -25.45
SHFE Alu 15855.00 -60.00 -0.38 16840.00 -5.85
SHFE Cu* 54220.00 -950.00 -1.72 71850.00 -24.54
SHFE Zin 14575.00 -180.00 -1.22 19475.00 -25.16
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07