[miningmx.com] — COPPER hit a three-week high on Tuesday,
lifted by fund allocations at the start of the year and by an expansion in
China’s manufacturing activity, which boosted hopes that demand for industrial
metals will increase.
Gains were kept in check, however, as Europe’s debt crisis remains
unresolved, clouding the outlook for the global economy and for metals demand
this year.
Three-month copper on the London Metal Exchange rose 0.78% to
$7,659.25 a tonne by 10:48 GMT from $7,600, having earlier hit its highest since
Dec. 12 at $7,703. Volumes were extremely low at around 3,400 lots, compared
with a usual 6,000 lots by mid-morning.
The metal, used in power and construction, posted its first annual decline
in three years in 2011 when it lost a fifth of its value on fears related to the
euro zone debt crisis and the global economic slowdown.
“Funds are now investing again, taking a bit more risk after a poor year,
and this is supporting the base metals. (China data) is of course also a
supporting factor,” said Quantitative Commodity Research analyst Peter Fertig.
He added, however, that the outlook is shaky. “It will depend on whether the
debt crisis calms down or whether investors remains jittery, (which) would be
negative for metals.”
China’s official purchasing managers’ index (PMI) rose to 50.3 in December
from 49 in November, indicating a slight expansion in business activity in the
factory sector, but downward risks persist.
In the wider markets, European shares, seen by some as a proxy for growth,
rose for a fourth consecutive session while the euro was up versus the dollar,
making dollar-priced commodities cheaper for European investors.
“China’s PMI number looks positive, better than most people had expected
earlier on,” said Huang Yiping, chief economist for emerging Asia at Barclays
Capital in Hong Kong.
“But caution remains in the market. The euro zone economy is declining, it’s
in negative growth.”
Also aiding copper, workers at Freeport McMoran Copper & Gold Inc’s
Indonesia unit delayed their return to work at the world’s second-largest copper
mine after a three-month strike over a labour dispute.
LME copper faces a resistance at $7,689 a tonne and only a rise
above this could open the way to $7,887, according to Reuters technical analyst
Wang Tao.
With trading conditions quiet, investor attention will turn to US ISM
manufacturing PMI data for December, due later in the session.
On Monday, a survey showed euro zone manufacturing activity declined for a
fifth consecutive month in December, although at a slightly slower rate than
November’s 28-month record low, suggesting the decline would continue in the
early months of 2012.
