July 16, 2012 / 4:17 PM / 5 years ago

LME copper dips; U.S., China stimulus eyed

NEW YORK/LONDON (Reuters) - Copper slipped on Monday, pressured by a decline in U.S. retail sales, worries over Europe’s crisis and by investor concerns over whether a presentation by the U.S. Federal Reserve chairman this week will yield any clues on monetary easing.

A worker checks a shipment of copper inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, about 164 km (101 miles) northwest of Santiago, April 16, 2012. REUTERS/Eliseo Fernandez

Data showed a surprise drop in U.S. retail sales in June, putting pressure on risky assets such as equities.

But losses in the metals market were reined in by hopes of further stimulus from top copper consumer China after Premier Wen Jiabao said Beijing would step up efforts to boost the economy, though investors were mindful that stimulus efforts would take time to bear fruit.

Three-month copper on the London Metal Exchange ended at $7,590 a tonne down from Friday’s close of $7,700. Prices had rallied 1.9 percent to a one-week high at $7,730 on Friday on relief over the Chinese growth data.

In New York, the COMEX September contract dropped 1.90 cents, or 0.5 percent, to settle at $3.4850 per lb. Dealings appeared consolidative after Friday’s surge.

COMEX copper volume reached around 35,550 lots in late New York trade, down nearly 30 percent from the 30-day norm, preliminary Thomson Reuters data shows.

“The market is expecting further easing in China ... and people are also expecting the Fed to do something (to stimulate the economy), and so Bernanke’s testimony will be the focus of attention tomorrow,” said Andrey Kryuchenkov, an analyst at VTB Capital.

Investors await comments due on Tuesday and Wednesday from U.S. Federal Reserve Chairman Ben Bernanke on his stance on supporting the flagging U.S. recovery.

The Fed last month expanded efforts to keep long-term interest rates low but held off from launching a third round of outright bond purchases that would expand its balance sheet, a form of stimulus known as quantitative easing.

“Base metals are marking time as prices remain largely range-bound in anticipation of some concerted central bank moves to stimulate the economy. Unfortunately the risk becomes to the downside as the longer we wait, the more worried the market gets,” RBC Capital Markets said in a note.

Steve Platt, futures strategist with Archer Financial Services in Chicago, saw some spillover pressure from platinum, also an industrial metal, which closed lower.

“I think copper’s taken a little bit of a cue there in terms of weakening, in response to not only the economic news but also a feeling that the slowing economy is going to weigh on values,” Platt said.

EURO ZONE WOES WEIGH

Also weighing on copper, the euro hovered near a two-year low versus the dollar earlier in the session, hurt by a report suggesting a change in the European Central Bank’s stance on how some bondholders could be treated under Spain’s bank bailout.

A weak euro makes dollar-priced metals costlier for European investors. Copper remained weak, however, after the euro changed direction and turned firm to a high of $1.2290.

The Wall Street Journal said ECB President Mario Draghi advocated imposing losses on holders of senior bonds issued by the worst-hit Spanish savings banks but also said finance ministers rejected the advice due to concerns financial markets would react badly to such a decision.

“Commodities have been very much affected by the euro, and from the physical markets standpoint we’re going through a quiet period. The next couple of months will not be easy for commodities; we’re looking for a meaningful recovery in price in the fourth quarter,” Nikos Kavalis, an analyst at RBS, said.

Any moves by Beijing to ramp up infrastructure spending would bolster demand for industrial metals, especially copper, though it would probably take time for Chinese industry to eat into China’s large stock surplus.

Data out on Friday showed copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 3.7 percent from a week ago to their highest since late May. Unreported bonded warehouse stocks are also said to be high.

Hedge funds and money managers meanwhile increased their net short position in copper to 4,813 contracts in the week to July 10, data showed on Friday.

In other metals traded, battery material lead ended at $1,899 from Friday’s close of $1,880, while zinc, used in galvanizing, closed at $1,900 from $1,874 and aluminum ended at $1,918 from $1,910.

Soldering metal tin closed at $18,750 from $18,780, while stainless-steel ingredient nickel ended at $16,250 from $16,200.

Additional reporting by Harpreet Bhal in London,; editing by Jane Baird

Our Standards:The Thomson Reuters Trust Principles.
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