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METALS-London copper dips on China, Japan factory activity
July 2, 2012 / 5:11 AM / in 5 years

METALS-London copper dips on China, Japan factory activity

* China, Japan PMIs weakest in seven months as exports
    * U.S. consumer spending flat in May
    * U.S. consumer confidence drops to six-month low in June
    * Euro zone allows direct recapitalisation of banks
    * Coming Up: EZ Markit Mfg PMI for June; 0758 GMT

 (Updates prices; adds quotes, details)
    By Carrie Ho
    SHANGHAI, July 2 (Reuters) - London copper fell back on
Monday, giving up part of its gains of 4 percent in the previous
session, after weekend data showed a factory slump had deepened
in June in one of Asia's biggest exporters, China. 
    The decline in China's purchasing managers' index (PMI)
fanned concerns over demand for industrial metals and followed
weak factory activity data in Japan on Friday.
    The soft data took some of the shine off last week's policy
breakthrough in the euro zone, where leaders agreed to expand
the use of rescue funds in ways that would ease market pressures
on indebted countries.  
    Three-month copper on the London Metal Exchange was
down 0.7 percent at $7,638 per tonne by 0420 GMT, after surging
4.1 percent on Friday - its largest single-day rise since Nov
    "The latest China PMI data has dampened sentiment,
underlining how fragile the global economy is," said Orient
Futures derivatives director Andy Du.
    The factory slump in China and Japan was deepened by
crumbling orders from abroad that dragged activity to
seven-month lows, fuelling fears the health of the global
economy was deteriorating.  
    The data tempered market optimism over Europe's surprise
deal last week, which led to a broad rally in riskier assets
including commodities, equities and the euro. 
    Under pressure to prevent a catastrophic breakup of their
single currency, euro zone leaders had agreed on Friday to let
their rescue fund inject aid directly into stricken banks from
next year and intervene on bond markets to support troubled
member states without them having to adopt extra austerity
    The most-active October copper contract on the Shanghai
Futures Exchange, which had risen 1.9 percent in the
prior session, edged up further on Monday by 0.4 percent to
55,470 yuan ($8,700) per tonne, catching up with London's gains
on the euro zone news last week. 
    Traders noted that much of Shanghai copper's rise so far has
been due largely to short-covering, as the ShFE website showed a
drop in open interest despite prices moving up, indicating
investor caution.
    "The euro zone's surprise decisions last week were highly
supportive to prices in the short term, but this effect won't
last as investors know the region's problems are a longer term
problem that will be hard to deal with," Du added.
    "Investors are less focused on the Chinese physical copper
market for now as things are still gloomy, with downstream
industry orders still sluggish."
    Market players noted that copper demand had improved in
recent weeks as bargain-hunting consumers restocked a bit to
take advantage of lower prices, but overall demand remained low.
    In the United States, concerns over the economy were stirred
after consumer spending growth ground to a halt in May as auto
purchases flagged, while confidence ebbed to a six-month low in
June, the latest signs of trouble for the economy.
    Federal Reserve officials on Friday said they were keeping
an eye out for any signs that slowing growth was raising
deflation risks but differed on how worrisome sluggish job
markets were for the modest U.S. economic recovery.
    Their assessment of how well the world's biggest economy is
doing will inform their decision on whether the Fed should roll
out more aggressive monetary easing measures - a move that is
likely to boost commodity prices. 
  Base metals prices at 0420 GMT
  Metal              Last       Change   Pct Move YTD pct chg
  LME Cu            7638.00    -52.00     -0.68      0.50
  SHFE CU FUT OCT2    55470       230     +0.42     -0.29
  LME Alum          1904.00     -7.00     -0.37     -5.74
  SHFE AL FUT OCT2    15465        75     +0.49     -2.37
  HG COPPER SEP2     346.70     -2.95     -0.84      0.90
  LME Zinc          1856.00    -24.00     -1.28      0.60
  SHFE ZN FUT OCT2    14700       115     +0.79     -0.64
  LME Nickel       16650.00    -80.00     -0.48    -11.01
  LME Lead          1855.00     -6.00     -0.32     -8.85
  SHFE PB FUT         14730        55     +0.37     -3.66
  LME Tin          18800.00     25.00     +0.13     -2.08
  LME/Shanghai arb    1258
   Shanghai and COMEX contracts show most active months
   ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE 
 third month
 ($1 = 6.3541 Chinese yuan)

 (Reporting by Carrie Ho; Editing by Ed Davies)

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