November 7, 2012 / 11:39 AM / 7 years ago

METALS-Copper falls to 2-month low as focus shifts to economy

* Focus shifts to U.S. fiscal cliff, Greece
    * Analysts see dollar firming on safe haven flows
    * Investors focus on China leadership transition

 (Updates with closing prices)
    By Eric Onstad and Harpreet Bhal
    LONDON, Nov 7 (Reuters) - Copper dropped to a two-month low on Wednesday as investors
switched focus from the outcome of the U.S. election to a weak European economy, a Greek
austerity vote and the U.S. "fiscal cliff" of tax hikes and spending cuts. 
    Copper initially jumped on news that U.S. President Barack Obama won a second term, fuelling
hopes Washington would continue with economic stimulus measures, pushing down the greenback. 
    But the dollar quickly reversed direction, touching a two-month high against a basket of
currencies, and making metals priced in dollars more expensive for holders of other currencies,
as attention quickly switched to problems in Europe.    
    Three-month copper on the London Metal Exchange ended at $7,610 from Tuesday's close
of $7,700. It earlier fell to its lowest since early September at $7,563.25 a tonne. 
    It had risen as much as 1.4 percent to an intraday high of $7,806.25 after the U.S. election
results emerged.
    "Investors have discounted the results of the election and have shifted their attention to
other pressing issues, such as the looming fiscal cliff and a key budgetary vote going on in
Greece," said Edward Meir, analyst at INTL FCStone. 
    The European Commission said the euro zone economy will barely grow next year, European
Central Bank President Draghi said the bank expects the euro zone economy to remain weak "in the
near term" and data showed German industrial output fell more than forecast in September.
  
    In Greece, the government overcame divisions on Wednesday to defeat an early challenge to an
austerity package needed to secure vital international aid, but it still faced internal dissent
and angry protests ahead of a final vote. 
    Analysts said the dollar should get further support from safe-haven flows prompted by
growing worries over the looming U.S. "fiscal cliff" that risks pushing the economy into deep
recession. 
    Copper is likely to extend losses in coming days after already falling more than 8 percent
since touching a peak of $8,422 on Sept. 19, said analyst Daniel Briesemann at Commerzbank in
Frankfurt.
    "In copper there are risks of some setbacks in the very short term. Have a look at Greece,
there's huge political risk in the euro zone, this should weigh on the euro and lead to a higher
dollar," Briesemann said.
    Speculators were expected to keep weighing on copper, which could revisit two-month lows
around $7,600 touched on Monday and may even slide as low as $7,500, Briesemann said.
    "But this could provide a floor for further price increases in the medium to long term," he
added.
        
    LEAD SHORT-TERM STRENGTH 
    Investor focus is now turning to a once-in-a-decade leadership transition in top copper
consumer China due to start at a Communist Party congress that starts on Thursday. Investors are
hoping the new government will announce new measures to spur growth. 
    "Just as in the case of the U.S. elections, investors will be glad when the party congress
is finally out of the way," said a Shanghai trader.
    Chinese downstream copper demand remains weak, with spot copper still trading at a discount
to Shanghai front-month futures prices. 
     China's plan to buy base metals for state reserves in an effort to cushion domestic
smelters from slowing economic growth would support prices but would not significantly reduce
bulging stockpiles, traders and analysts said. 
    Lead closed at $2,176 from Tuesday's close of $2,165. 
    Briesemann said the supply-demand fundamentals looked positive for lead in the short term
amid hopes for stronger battery demand in China and low availability of LME inventories.
    LME stocks MPBSTX-TOTAL are down 17 percent since February and 42 percent are cancelled
and not available to the market.
    Lead spreads remained tight, with the premium of cash over three months CMPB0-3rising to
$12.50 by Tuesday's close from $10 on Monday and a discount of $6 on Oct. 23. 
    Zinc ended at $1,896 from Tuesday's close of $1,899. Stocks data MZNSTX-TOTAL
showed 88,250 tonnes of fresh cancellations, increasing total cancelled material not available
to consumers to 39 percent of the total.
    Nickel closed at $15,995 from $16,075 while tin ended at $20,300 from
$20,625. Aluminium closed at $1,920 from a last bid of $1,920 on Tuesday. 
    
 Metal Prices at 1704 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       345.25       -5.35     -1.53     344.75      0.15
  LME Alum      1920.50       14.50     +0.76    2020.00     -4.93
  LME Cu        7610.25      -89.75     -1.17    7600.00      0.13
  LME Lead      2181.00       16.00     +0.74    2034.00      7.23
  LME Nickel   15991.00      -84.00     -0.52   18650.00    -14.26
  LME Tin      20310.00     -315.00     -1.53   19200.00      5.78
  LME Zinc      1899.00        0.00     +0.00    1845.00      2.93
  SHFE Alu     15335.00       35.00     +0.23   15845.00     -3.22
  SHFE Cu*     56560.00      510.00     +0.91   55360.00      2.17
  SHFE Zin     14925.00       95.00     +0.64   14795.00      0.88
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
 
    

 (Additional reporting by Carrie Ho in Shanghai; editing by William Hardy)
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