LONDON (Reuters) - Copper edged lower on Monday as a weak euro and worries over the euro zone debt crisis weighed, and as investors grew concerned over whether a presentation by the U.S. Federal Reserve chairman this week would yield any clues on monetary easing.
But losses 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 stimulus efforts would take time to bear fruit.
"Hints of quantitative easing or comments suggesting further loosening in China are supportive, but there's lots of headwinds at the moment so we need something really aggressive to have a sustained recovery in this backdrop," RBS analyst Nikos Kavalis said.
Recent data showed China's economic growth slowed for a sixth successive quarter to 7.6 percent in April to June. The number met market forecasts, however, offering investors some relief.
Three-month copper on the London Metal Exchange fell 0.58 percent to $7,655 per metric ton (1.1023 tons) by 5.23 a.m. EDT. Prices had rallied 1.9 percent to a one-week high at $7,730 on Friday on relief over the Chinese growth data.
With some clarity on stimulus measures in China, investors now await comments due Tuesday and Wednesday from Fed 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.
"Markets are settling back into wait-and-see mode ahead of testimony by Fed Chairman Bernanke to U.S. lawmakers on the state of the economy and potentially the central bank's policy options," ANZ Bank said in a research note.
The euro hovered near a two-year low versus the dollar as investors remained wary about soaring borrowing costs in indebted Spain and Italy. A weak euro makes dollar-priced metals costlier for European investors.
Italian banks shrugged off a Moody's downgrade of Italy's credit rating to near-junk status and helped Rome sell the maximum amount of bonds it was targeting at an auction on Friday, but 10-year yields rose to near 6 percent.
"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," Kavalis 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 fell 0.55 percent to $1,869.75 a metric ton, zinc, used in galvanizing dropped 0.59 percent to $1,863, while aluminum fell 0.55 percent to $1,899.50.
Soldering metal tin fell 0.96 percent to $18,600 a metric ton, while stainless-steel ingredient nickel fell 0.67 percent to $16,091.
editing by Jane Baird