July 5, 2012 / 11:41 AM / 8 years ago

METALS-Copper up after China rate cut, awaits ECB decision

* China cuts interest rates 2nd time this year
    * ECB 1/4 point rate cut priced in markets
    * Bank may hold fire on bond buying
    * Coming Up: ECB rate decision; 1145 GMT

 (Updates with Chinese rate cut, updates prices)
    By Eric Onstad and Carrie Ho
    LONDON/SHANGHAI, July 5 (Reuters) - Copper rose on Thursday after China
trimmed interest rates, but the move was tentative ahead of a European Central
Bank meeting that is expected to cut rates and may revive stimulus measures that
could boost economic growth and metals demand.
    Three-month copper on the London Metal Exchange rose as much as 0.8
percent to a session high of $7,790 per tonne after the Chinese central bank cut
its benchmark lending rate by 31 basis points to 6 percent, 
    It was the second time in two months the People's Bank of China had cut
rates as it aims to bolster slowing growth in the world's second-largest
    Aluminium pared losses after the Chinese move to be down 0.1 percent
at $1,950 a tonne at 1117 GMT.
    Copper has rebounded about 5 percent since last Thursday, boosted by a
European agreement on a surprise euro zone rescue deal and expectations that
weak economic data would lead to fresh stimulus measures by global central
    Investors expected the ECB to cut rates by a quarter percentage point when
it announces its decision at 1145 GMT, after surveys showed all of Europe's
biggest economies are in recession or heading there.
    Some also hoped that ECB President Mario Draghi will announce the bank will
resume its purchases of government bonds when he holds a news conference at 1230
GMT, but analysts said this was an unlikely scenario. 
   "The markets have largely priced in a (ECB) cut already, so it's hard to see
that we're going to have any significant further bounce," said analyst Wiktor
Bielski at VTB Capital in London.
    "I suspect the ECB possibly wants to just hold its fire for the time being,
a little bit like the Fed, and try to time any announcement so it can get the
biggest and most positive reaction."
    A rate cut by the ECB would back up the EU summit deal to strengthen the
region's financial system and help avert a break-up of the euro zone.
    Investors are also keeping an eye on Friday's key monthly U.S. jobs report
for clues on whether the Fed will take additional easing steps. Non-farm
payrolls were expected to see an addition of 90,000 workers in June, with the
unemployment rate holding steady at 8.2 percent.  
    In physical markets, opportunistic restocking in China have helped support
copper prices and keep the spread of Shanghai's July contract over its
October contract in backwardation since early May. 
    Prices may also be bolstered by a small pick-up in downstream copper demand.
In a note on Thursday, Barclays Commodities Research said demand was solid for
transport-related copper and improving for copper wire order books in China, but
warned that sentiment remained bearish, which means fewer long positions by
    "Risk to prices in the near term is from positioning and policy, either of
which would trigger a sharp short-covering rally. However, we would view these
gains as difficult to sustain without an improvement in economic activity," it
    In China, Shanghai aluminium was one of the session's best performers, with
the most active Shanghai contact recovering 5.1 percent by the end of
the day from a three-year low it posted last week as Chinese traders piled back
in believing it was oversold. 
    "Despite problems of overcapacity in China, aluminium looks one of the most
attractive to traders now among the industrial metals at these low price
levels," said a metals buyer. 
    In other metals, LME nickel gained 1.1 percent to $17,114 a tonne
and zinc rose 0.33 percent to $1,904.25 a tonne.
    Tin was unchanged at $19,150 a tonne and lead added 0.5
percent to $1,915.25.
 Metal Prices at 1120 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
  COMEX Cu       353.70       -0.10     -0.03     344.75      2.60
  LME Alum      1955.25       -0.75     -0.04    2020.00     -3.21
  LME Cu        7777.25       52.25     +0.68    7600.00      2.33
  LME Lead      1914.00        8.00     +0.42    2034.00     -5.90
  LME Nickel   17124.00      194.00     +1.15   18650.00     -8.18
  LME Tin      19095.00      -55.00     -0.29   19200.00     -0.55
  LME Zinc      1902.75        4.75     +0.25    1845.00      3.13
  SHFE Alu     15700.00       30.00     +0.19   15845.00     -0.92
  SHFE Cu*     56090.00       10.00     +0.02   55360.00      1.32
  SHFE Zin     14820.00       20.00     +0.14   14795.00      0.17
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
 (Editing by James Jukwey and Jane Baird)
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