July 16, 2012 / 12:38 PM / 5 years ago

LME copper dips; U.S., China stimulus eyed

LONDON (Reuters) - Copper slipped on Monday, pressured by weak U.S. retail sales, worries over Europe’s crisis, and by investor concerns over whether a presentation by the U.S. Federal Reserve chairman this week will yield any clues on monetary easing.

Data showed a surprise drop in U.S. retail sales in June, putting pressure on risky assets such as equities.

But losses in the metals market 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 that stimulus efforts would take time to bear fruit.

Three-month copper on the London Metal Exchange declined to $7,684 a tonne at 1451 GMT, from Friday’s close of $7,700. Prices had rallied 1.9 percent to a one-week high at $7,730 on Friday on relief over the Chinese growth data.

“The market is expecting further easing in China ... and people are also expecting the Fed to do something (to stimulate the economy), and so Bernanke’s testimony will be the focus of attention tomorrow,” said Andrey Kryuchenkov, an analyst at VTB Capital.

Investors will await comments due Tuesday and Wednesday from U.S. Federal Reserve 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.

“Base metals are marking time as prices remain largely range-bound in anticipation of some concerted central bank moves to stimulate the economy. Unfortunately the risk becomes to the downside as the longer we wait, the more worried the market gets,” RBC Capital Markets said in a note.


Also weighing on copper, the euro hovered near a two-year low versus the dollar, hurt by a report suggesting a change in the European Central Bank’s stance on how some bondholders could be treated under Spain’s bank bailout.

A weak euro makes dollar-priced metals costlier for European investors.

The Wall Street Journal said ECB President Mario Draghi advocated imposing losses on holders of senior bonds issued by the worst-hit Spanish savings banks but also said finance ministers rejected the advice due to concerns financial markets would react badly to such a decision.

“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,” Nikos Kavalis, an analyst 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 was at $1,878 from Friday’s close of $1,880, while zinc, used in galvanizing, slipped to $1,869 from $1,874 and aluminum fell to $1,900.75 from $1,910.

Soldering metal tin was at $18,740 from $18,780, while stainless-steel ingredient nickel slipped to $16,132 from $16,200.

editing by Jane Baird

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