May 30, 2012 / 6:07 AM / 5 years ago

METALS-Copper falls on Spain woes, China lends support

* Spain to recapitalise Bankia by issuing new debt - govt
source
    * Germany's 10-year bond yield hit a fresh record low
    * Egan-Jones cuts Spain's credit level to B from BB-minus
    * Coming Up: EZ economic sentiment in May; 0900 GMT

 (Updates prices, adds quotes, details)	
    By Carrie Ho	
    SHANGHAI, May 30 (Reuters) - Copper slipped on Wednesday
after authorities in China damped expectations that they would
roll out a large stimulus programme, following recent
announcements and reports of more government spending to spur
growth. 	
    Markets were also pressured by renewed euro zone debt fears
after a downgrade of Spain's credit rating stirred worries the
country's debt could spiral out of control.	
    Three-month copper on the London Metal Exchange fell
0.4 percent to $7,640.20 a tonne by 0759 GMT, after falling 0.2
percent on Tuesday.	
    The most-active September copper contract on the Shanghai
Futures Exchange fell 1.4 percent to 55,320 yuan to
close at ($8,700) a tonne, after losing 0.2 percent in the prior
session.	
    "Prices went up late last week after the Chinese government
first talked about policy fine-tuning to spur growth. It led to
an equities rally and short-covering in metals, but that
optimism is fading today, which is why prices have slipped," an
analyst with an international trader said.	
    Comments in the Chinese state-backed media on Wednesday
showed that Beijing was trying to temper investors' hopes for
more economic stimulus. 	
    The comments included remarks by influential academics and
an official of the state planning unit, the National Development
and Reform Commission (NDRC), all spelling out that the
government was unlikely to roll out large-scale stimulus
packages despite recent policy actions to invest in various
sectors of the economy.    	
    "Although the policy actions look exactly like the ones
adopted nearly four years ago, they are not a big stimulus
package. The projects were planned under the Five-Year Program,
spending is more modest, and the projects and industries were
chosen more selectively," Barclays analyst Yiping Huang said in
a research note.	
    Traders said they would avoid going too long until there was
evidence of a pickup in demand in downstream industries fuelled
by the newly announced government spending programmes.	
    "Major copper buyers in China recently told us their order
books were still very weak. This will be a factor weighing on
prices at least in the short- to medium-term," said a
Shanghai-based trader.	
    He added that fears over the euro zone debt crisis,
underlined by Spain's banking woes, were also weighing on metals
prices during the session.	
    Egan-Jones Ratings cut Spain's credit score for the third
time in less than a month, saying the need to support the
country's banks was putting new strains on Spanish public
finances. 	
    The rating downgrade dragged Spanish stocks lower, while
news that the government would issue new debt, instead of
injecting bonds, to recapitalise troubled lender Bankia, also
caused Spain's borrowing costs to ratchet up to near six-month
highs. 	
    The latest string of bad news from Spain also rattled the
euro, causing it to fall to its lowest in nearly two years,
while Asian shares also slipped.  	
    However, investors took heart from polls showing a party
that backs Greece's international bailout was leading ahead of a
June 17 election. If the New Democracy Party can form a
government, Greece would be less likely to quit the euro.
 	
    Separately, U.S. home prices edged higher for the second
month in a row in March as the housing recovery picked up
traction. 	
    	
                                                               
  Base metals prices at 0759 GMT
  Metal              Last       Change   Pct Move YTD pct chg
  LME Cu            7640.20    -29.80     -0.39      0.53
  SHFE CU FUT SEP2    55320      -760     -1.36     -0.56
  LME Alum          2011.25     -4.75     -0.24     -0.43
  SHFE AL FUT SEP2    15980       -50     -0.31      0.88
  HG COPPER JUL2     342.30     -3.90     -1.13     -0.38
  LME Zinc          1892.00    -22.00     -1.15      2.55
  SHFE ZN FUT SEP2    14895      -125     -0.83      0.68
  LME Nickel       16621.00    -29.00     -0.17    -11.17
  LME Lead          1927.75    -20.25     -1.04     -5.27
  SHFE PB FUT         15130      -120     -0.79     -1.05
  LME Tin          19925.00   -275.00     -1.36      3.78
  LME/Shanghai arb    1307
 
   Shanghai and COMEX contracts show most active months
   ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE 
 third month
                                                               
 ($1 = 6.3480 Chinese yuan)	
	
 (Reporting by Carrie Ho; Editing by Clarence Fernandez)

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