September 3, 2012 / 4:35 AM / 6 years ago

METALS-Copper up on economic stimulus hopes after gloomy China data

* China factory sector contraction intensifies in August
    * Lead forward curve tightens after large LME stock draws
    * Coming up: Euro zone markit manufacturing PMI for August
at 0758 GMT


    By Melanie Burton and Carrie Ho
    SINGAPORE, Sept 3 (Reuters) - London copper edged higher on
Monday on hopes that central banks around the world will step in
to fuel economic growth after concerns about the U.S. jobs
sector and gloomy China factory data.
    A contraction in China's factory sector activity intensified
in August as both output and new orders dropped while
manufacturers cut prices to compete for business, a survey
showed on Monday. 
    The HSBC Purchasing Managers' Index fell to a
seasonally adjusted 47.6, its lowest level since March 2009. The
reading was little changed from a flash, or preliminary,
estimate of 47.8 and was lower than 49.3 in July.
    
    The data, the latest evidence of the slowdown in the world's
second largest economy, precedes a Sept. 7 report on U.S. jobs
growth which many investors believe is key to any decision on 
launching another bout of stimulus measures, especially after 
U.S. Federal Reserve chairman Ben Bernanke expressed concern
about employment levels in the country.    
    Bernanke on Friday left the door wide open to a further
easing of monetary policy, saying the stagnation in the U.S.
labour market was a "grave concern", but he stopped short of
providing a clear signal of imminent action. 
    "The market is still looking to the major central banks
around the world to step up to the plate and support policy and
growth," said senior metals strategist Nick Trevethan of ANZ
bank in Singapore.
    "The market is a bit disillusioned by China's policy
inaction. We think China has to do something fairly drastic,
maybe a 50, or even 100, basis point cut in the reserve
requirement ratio because its repo action doesn't seem to have
been especially effective," Trevethan added.
    The People's Bank of China has been using short-term reverse
repos since May to adjust liquidity in the main money rate, the
seven-day repo rate, in more nuanced moves to support its
economy than RRR or direct interest rate cuts. 
 
    Three-month copper on the London Metal Exchange 
ticked up 0.45 percent to $7,644.50 per tonne by 0344 GMT,
extending gains from the session before when it closed the month
of August up 0.6 percent. 
    Copper prices have edged into positive territory for the
year, but are still down by some 13 percent from the year's
peaks hit in February.
    The most active December copper contract on the Shanghai
Futures Exchange climbed 1 percent to 55,980 yuan
($8,800) per tonne.
    This week, investors will be focusing on a pivotal European
Central Bank policy meeting on Thursday, in which chief Mario
Draghi is expected to announce concrete steps to cut borrowing
costs for indebted euro zone nations. 
    
    LEAD STOCKS DROP    
    LME lead prices have been supported by recent drawdowns from
LME stocks. The spread between cash and the three-month contract
on the LME hit its narrowest in four months on Friday,
reflecting tightening supply that traders said was mostly
consumption related.
    LME stocks have dropped by almost a third over the past two
weeks, and this could trigger a spike in short-term prices in
September, traders and warehouse officials said.
    Available stocks in LME-registered warehouses have slumped
by around 92,000 tonnes, or 32 percent, since Aug. 13, and half
of those drawdowns are due for delivery out of Singapore,
draining the port of all but 1,725 tonnes of metal. 

    DATA/EVENTS (GMT)
                                                                       
  Base metals prices at 0344 GMT
  Metal              Last       Change   Pct Move YTD pct chg
  LME Cu            7644.50     34.50     +0.45      0.59
  SHFE CU FUT DEC2    55980       560     +1.01      1.12
  HG COPPER DEC2     347.50      1.80     +0.52      1.14
  LME Alum          1896.75     -5.25     -0.28     -6.10
  SHFE AL FUT DEC2    15385        55     +0.36     -2.90
  LME Zinc          1849.00      8.00     +0.43      0.22
  SHFE ZN FUT DEC2    14760        75     +0.51     -0.24
  LME Nickel       16095.00    145.00     +0.91    -13.98
  LME Lead          1974.00      9.00     +0.46     -3.00
  SHFE PB FUT      15150.00     20.00     +0.13     -0.88
  LME Tin          19470.00    120.00     +0.62      1.41
  LME/Shanghai arb^     711
 
   Shanghai and COMEX contracts show most active months
0 : 0
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