SINGAPORE, Feb 22: LME copper edged up on Friday from two-month lows hit in the prior session, but was heading for its biggest weekly loss in eight months on worries about the U.S. Central bank’s commitment to its accommodative monetary policy.
Three-month copper on the London Metal Exchange rallied 0.81 percent to $7,923.75 a tonne by 0300 GMT, recouping some losses from the previous session, when it hit its lowest since Dec. 24 at $7,813.50 a tonne.
Copper prices suffered on Thursday their biggest single-day slide for 2013, losing year to date gains of nearly five percent by early February to fall into the red. Prices are set for a drop of more than 3 percent on the week, the steepest fall since early June.
The most-traded May copper contract on the Shanghai Futures Exchange rose 0.07 percent to 57,700 yuan ($9,200) a tonne.
‘The question is what percentage of the copper price is propped up by free money. If equity markets fall one percent, then all of a sudden people walk away, you have to wonder how much of different asset prices is propped up by excess liquidity,’ said Matt Fusarelli, an analyst at Australia-based consultancy AME Group.
Even a steady improvement in the world’s top two economies, China and the United States, which make up about half of global demand, won’t be enough to ignite copper prices, which AME Group expects to end the year at $3.30 a pound ($7,275 a tonne).
Asian shares edged higher on Friday, recouping the previous day’s steep losses, while weak data from the United States and Europe clouded growth prospects, limiting gains.
The dollar traded near a 5-1/2-month high against a basket of currencies on Friday, on doubts over just how long the U.S. Federal Reserve will keep its quantitative easing in place.
U.S. Federal Reserve officials are likely to press on with their bond-buying stimulus program even though some harbour growing concerns the purchases could fuel an asset bubble or inflation if pushed too far.
Still, a raft of U.S. Economic data on Thursday from claims for jobless aid to factory activity and consumer prices pointed to a still tepid recovery and supported the argument for the Federal Reserve to maintain the stimulus.
President Barack Obama spoke to Republican congressional leaders on Thursday in the first sign of movement to head off across-the-board government spending cuts that could take effect in a week.
BARGAIN HUNTING
In Asia, traders were interested in buying copper intraday although with much of China’s industry yet to ramp up from Lunar New Year, any rebound next week could prove fragile, they said.
‘I would be a buyer at these levels,’ said one.
Trade volume on Friday was a solid 4,600 lots by 0300 GMT after more than 33,000 lots changed hands in the previous session, the third highest turnover in the past year for three-month copper.
‘While the complex looks well wounded and many are expecting further weakness, the right kind of buying has begun to emerge and we would think the complex won’t fall much further,’ RBC Capital said a note.
‘Trying to catch the proverbial falling knife is always a challenge and we are just starting to see the bulls emerge, so we would expect volatility to remain elevated for some time.’
(AGENCIES)
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