ETF News

UPDATE 7-Copper tracks oil lower, dollar gains hurt

 * Copper reverses gains after hitting one-week high
 * Fall in oil prices, rise in dollar weigh on metal prices
 * Factory output growth in China slows
 (Updates with New York prices, comment)
 LONDON, Aug 14 (Reuters) - Copper reversed early gains on
Thursday as the dollar strengthened, oil prices fell and as
traders worried about global demand.
 Three-month copper MCU3 on the London Metal Exchange ended
the day at $7,385 per tonne, down $15 from Wednesday and compared
to $7,617 earlier in the day and its highest since August 8.
 Copper for September delivery HGU8 lost 4.70 cents to end at
$3.3050 per lb by the end on the New York Mercantile Exchange's
COMEX division. It advanced as far as $3.4340 a lb., a one-week
peak, and support held with a higher low at $3.3045 per lb.
 "Copper's tracking oil at the moment," said John Kemp,
economist at RBS Sempra, adding that the metal reversed its gains
as oil prices drifted lower.
 Oil futures slid as the dollar strengthened amid concerns
about euro zone economic weakness and rising U.S. inflation.
 Crude prices fell towards $113 a barrel, after a $3 rise in
the previous session, following a larger-than-expected drop in
U.S. crude and gasoline inventories. [O/R]
 The benchmark metal used in power and construction moved in
erratic trade this week, hitting a six-month low of $7,150 a tonne
on Tuesday as the commodity sell-off reached a peak.
 But profit-taking since then on short positions -- bets on
lower prices -- helped prices bounce from their multi-month lows
 "A lot of commodity markets got themselves very short, but
there's been a bit of a shift in sentiment, people are thinking
prices had bottomed, at least in the short term."
 Still, in the medium to longer term, markets are watching
industrial activity in China, where data showed factory output
growth slowed to 14.7 percent in July, a 19-month low, as
manufacturers struggled with weakening export demand.
 That compares with a consensus of 15.9 percent and a figure of
16 percent in June.
 Industrial production data is a strong indicator of metals
demand and one of China's biggest export market is the United
States, where a housing market slump has hit copper demand.
 "Chinese consumers haven't been in the market for a long time
now. That's not going to change anytime soon," an LME trader said,
adding that funds had been behind most of the activity in recent
 Negatives for copper include stocks in LME warehouses, which
are at six-month highs around 153,000 tonnes, a gain of about 40
percent since early May, and news that the euro zone economy
contracted in the second quarter. [ID:nLE138387]
 Another dampener is the falling backwardation or premium for
cash material MCU0 over the three-month contract, which is at
around $50 a tonne from around $240 a tonne in mid-July.
 Three-month copper meanwhile is down about 16 percent since a
record high of $8,940 a tonne hit on July 2.
 "A cyclical downturn in demand will ease the situation,"
Standard Chartered said in a note.
 "But long-term secular demand growth from industrialisation
and rising incomes in Asia, and particularly China and India, are
still dominant trends."
 That is particularly true for China, which consumes about 25
percent of total global annual copper production estimated at more
than 18 million tonnes. But Chinese consumers have been absent
from the market for some months now.
 "The Olympics mean activity has stalled in China," a
London-based trader said.
 But he added that the narrowing gap between copper prices in
London and Shanghai could persuade Chinese consumers to return as
activity in the fourth quarter picks up.
 Aluminium closed at $2,776, down $37 from Wednesday. The metal
used in packaging, transport and construction was boosted by the
higher oil price, but the likelihood of an oversupplied market
could mean lower prices are on the cards.
 Tin MSN3 jumped more than 5 percent to $18,850 a tonne on a
short-covering rally and closed at $18,700 from $17,800, nickel
MNI3 at $19,000 from $19,500 and lead at $1,660 from $1,684 at
the close on Wednesday.
 Zinc MZN3 gained to $1,650 a tonne from Wednesday's last bid
at $1,645.
 Metal Prices at 1617 GMT
 Metal            Last      Change  Pct Move   End 2007   Ytd Pct
 LME Cu        7365.00      -35.00     -0.47    6670.00     10.42
 SHFE Cu*     58380.00      880.00     +1.53   56880.00      2.64
 LME Alum      2777.00      -36.00     -1.28    2403.00     15.56
 SHFE Alu*    18495.00      120.00     +0.65   18180.00      1.73
 COMEX Cu**     334.60       -2.10     -0.62     303.05     10.41
 LME Zinc      1630.00       12.00     +0.74    2370.00    -31.22
 SHFE Zinc*   13895.00       85.00     +0.62   18950.00    -26.68
 LME Nick     19100.00     -400.00     -2.05   26350.00    -27.51
 LME Lead      1655.00      -29.00     -1.72    2550.00    -35.10
 LME Tin      18500.00      700.00     +3.93   16400.00     12.80
** 1st contract month for COMEX copper * 3rd contact month for
SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
 (Additional reporting by Humeyra Pamuk and Carole Vaporean in New
York; Editing by Christian Wiessner)