August 30, 2013 / 10:16 AM / 4 years ago

METALS-Copper falls on firm dollar, on Fed tapering concerns

* U.S. data mixed, but Fed still seen curbing stimulus

* Copper stocks reverse trend, rise on LME and in Shanghai

* All base metals hit multi-week lows

By Maytaal Angel and Eric Onstad

LONDON, Aug 30 (Reuters) - Copper fell to a three-week low on Friday, pressured by a stronger dollar and expectations that U.S. stimulus would be withdrawn starting next month, which could hamper growth and crimp the flow of money invested in commodities.

The metal closed the week down 3.5 percent, the biggest weekly loss since mid-June. For the month, however, it still notched up its biggest gain since May.

Copper has rebounded 3.2 percent in August on signs of a stabilising global economy, in particular top metals consumer China, but the market faces headwinds going into September.

"We've had some encouraging economic data especially out of China, but our feeling is that copper has peaked and will now edge lower. We see looming surplus building in the second half and the Fed tapering will probably see some speculative selling of commodities," said Robin Bhar, an analyst at Societe Generale.

Three-month copper on the London Metal Exchange shed 0.8 percent to close at $7,095 a tonne, after hitting a session low of $7,081.50, the weakest since Aug. 8.

U.S. economic data recently has been mixed, but most analysts still expect the Fed to start trimming its $85 billion in monthly bond purchases next month.

The case for Fed tapering of monetary stimulus was bolstered on Thursday by positive U.S. growth and jobless claims data, but a cautionary note came on Friday with data showing U.S. consumer spending barely rose.

Also weighing on metals was a dollar index that hovered near a four-week high. A stronger U.S. currency makes dollar-priced metals costlier for European and other non-U.S. investors.

U.S. officials suggested President Barack Obama would be willing to proceed with limited military action against Syria even without specific promises of allied support, notably from Britain. The political uncertainty was also denting appetite for risky assets such as copper.

OTHER METALS ALSO SLIDE

Aluminium, zinc and nickel all followed copper to three-week lows, while tin touched the weakest in nearly four weeks, and lead hit its lowest in 2-1/2 weeks.

Weighing on copper, data showed stocks in Shanghai Futures Exchange (SHFE) warehouses rose 0.3 percent from last Friday, while daily LME data showed a 10,325 tonne rise in copper stocks to 588,000.

The rises interrupted a stocks downtrend in place on the LME and SHFE since June.

Also, Chinese buyers may cut previously booked LME refined copper stocks over coming months as arrivals into the world's top consumer of the metal have built up inventories and weighed on spot premiums, traders said on Friday.

On the upside for copper, however, China's factory activity in August may have expanded at the fastest pace in three months, a Reuters poll showed, adding to evidence that the world's second-largest economy may be stabilising.

China accounts for about 40 percent of global copper demand.

"Going into the fourth quarter we usually see a bit of restocking demand from China. We're not expecting a huge recovery in the copper market, but prices could come back up to $7,500," said commodity analyst Natalie Rampono of ANZ in Melbourne.

Aluminum Corp of China Ltd (Chalco), the country's top aluminium producer, posted a first-half net loss of 623.8 million yuan ($101.9 million), hurt by lower prices and oversupply in the world's top producer and consumer of the metal.

Aluminium failed to trade in closing open outcry activity, but was last bid at $1,813 a tonne, down 1.2 percent

"Aluminum looks quite poor on the charts in that a good portion of August's gain has been relinquished in a matter of days," analyst Edward Meir at INTL FCStone said in a note.

"The earlier lows of $1,770 are now back in play in terms of being the next downside target."

Zinc slid 1.6 percent to finish at $1,905 a tonne, while lead lost 2.0 percent to $2,151.50.

Tin gave up 0.8 percent to $21,225 a tonne, while nickel fell 1.9 percent at $13,800.

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