Metals - Copper rises as improved sentiment encourages bargain hunting
fxstreet.com
Wed, Aug 22 2007, 14:06 GMT
afxnews.com
LONDON (Thomson Financial) - Copper held steady above 7,000 usd per tonne in afternoon trade, supported by an improvement in sentiment as European share prices continued their recovery for a second day, and on a higher opening on Wall Street.
The red metal remains underpinned by the threat of strike action among producers in Latin America, with industrial unrest continuing to rumble in Mexico and Peru, analysts said.
Base metals were higher across the board, as investors bought into the complex after the significant price declines of recent weeks.
Investors had liquidated metals holdings to cover losses on the stock markets, which tumbled on the fall-out from the sub-prime mortgage market.
Declining asset values had also led to a rise in risk aversion, which has been offset by a strengthening in stock market values in recent days.
"Investor sentiment is recovering... with European equities higher, the US dollar weaker and credit spreads narrower, as judged by the iTraxx European Crossover Index, which is down around 7 points," said Michael Jansen, an analyst at JP Morgan. "With this backdrop, base metals are modestly higher."
"The short term direction will continue to be driven by the wider influences emanating from financial markets."
"The more important influence that we now continue to monitor closely is whether these financial market disruptions are beginning to affect base metal demand. So far, evidence is patchy and inconclusive," he added.
At 2.41 pm, copper for three-month delivery was trading at 7,145 usd against 6,975 usd at the close yesterday.
The market largely shrugged off news of an interest rate hike in China, the world's biggest consumer of copper. China's central bank raised interest rates for the fourth time this year yesterday to fight mounting inflation and cool surging growth.
While any attempt to slow economic growth could potentially crimp demand for base metals, analysts said the move had been expected and that the effect of previous hikes had always proved short-lived.
Data on Chinese imports and exports for July also provided little direction. Refined copper imports were just above 100,000 tonnes, in line with expectations, and remained stronger year on year.
Among other metals, tin, yesterday's biggest faller, rose to 14,350 usd versus 14,085 usd, lead climbed to 3,010 usd from 2,885 usd yesterday, and nickel edged up to 28,050 usd from 27,200 usd.
The metals could be heading for further rises, analysts said, as supply and demand fundamentals governing all three remain tight.
The lead market swung into a production deficit in the first half of 2007 from a surplus a year before, while nickel also posted a deficit and tin a small surplus, according to figures released by the World Bureau of Metals Statistics.
"With the weak technical longs now shaken out of lead and tin and a large short built up in nickel, the minor metals look set to shine again," said analysts at RBC Capital Markets.
"Barring further bouts of vertical fatigue brought on by concerns from the credit markets, fundamentals are looking set to reassert themselves."
Elsewhere aluminium prices rose to 2,516 usd from 2,478 usd at the close yesterday, while zinc inched up to 3,075 usd from 3,000 usd.
jan.harvey@thomson.com |
