Copper gains on upbeat China data, weak euro weighs

By Harpreet Bhal

LONDON (Reuters) - Copper edged higher on Thursday, as encouraging data from top consumer China helped bolster the outlook for demand, but gains were capped by a fall in the euro after weak euro zone economic data renewed fears about the region's growth prospects.

Three-month copper on the London Metal Exchange traded at $7,626 a tonne in official rings, up from a close of $7,620 on Wednesday, and rebounding from a seven-month low of $7,486.25 hit on Tuesday.

Growth in China's vast manufacturing sector picked up in March, a preliminary survey of factory managers showed on Thursday, pointing towards solid but not spectacular first-quarter growth in the world's second-largest economy.

"The data from China is the main driving force behind a continued recovery in base metal prices," said Daniel Briesemann, analyst at Commerzbank.

"It shows that economic activity in China has picked up after the new year holiday and we expect to see improved economic figures in coming months lending support to prices."

The HSBC Purchasing Managers' Index for China revived to 51.7 in March, from 50.4 in February, on the back of stronger new orders and production growth.

"This implies that the Chinese economy is still on track for gradual growth recovery. Inflation remains well behaved, leaving room for Beijing to keep policy relatively accommodative in a bid to sustain growth recovery," HSBC said in a client note.

Weighing on prices, however, was a drop in the euro against the dollar after weaker-than-expected German activity data prompted caution over the outlook for growth.

A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.

Cyprus' uncertain financial condition remained on the radar, with the European Central Bank giving Cyprus until Monday to raise billions of euros to clinch an international bailout or face losing emergency funds for its crippled banks and inevitable collapse.

STRIKE

Helping fuel some bullish sentiment in copper was news that Codelco, the world's No. 1 producer, has been unable to export some metal from its massive mines due to a strike by port workers in northern Chile.

That alongside the HSBC flash PMI, a likely resolution to the Cyprus issue and a favourable arbitrage was helping spur copper imports, a trade house analyst in Shanghai said.

"We have seen some aggressive consumer buying over the last 5-10 days. I feel it's not 100 percent related to the strong demand pick up yet, it's more slow restocking because of the lower flat price, and people are afraid the price will rebound," he said.

Latest data from the International Copper Study Group showed the world refined copper market deficit deepened last year to 340,000 tonnes, from 216,000 tonnes in 2011, due to constrained growth in refined production and a surge in usage in China.

In other metals, aluminium traded at $1,937 from Wednesday's close of $1,939 while zinc was at $1,950 from $1,931.

Data showed zinc stocks in LME-registered warehouses fell 3,900 tonnes, with cancelled warrants, material earmarked for delivery, at 60.11 percent of total stock.

Tin traded at $22,700 from $22,600, while lead traded at $2,208.50 from a close of $2,188 on Wednesday. Nickel was at $16,945 from $16,810.

Growth in global production of primary nickel this year is set to outpace consumption growth, increasing the surplus in the global market, the Lisbon-based International Nickel Study Group (INSG) forecast.

Source: http://news.yahoo.com/copper-gains-upbeat-china-data-weak-euro-weighs-131833211--sector.html

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