MELBOURNE, Feb 5: London copper sank on Thursday from two-week highs touched the session before as traders who bought copper on talk of fresh easing measures by China took profits after it cut its bank reserve requirements. China’s central bank made a system-wide cut to bank reserve requirements on Wednesday, the first time it has done so in over two years, to unleash a fresh flood of liquidity to fight off economic slowdown and looming deflation.
“The market is not too fully convinced that this is the real deal in terms of boosting metals demand,” said analyst Dominic Schnider of UBS in Hong Kong. “The focus remains on why they are doing this in the first place – and the focus is weak activity,” he added. UBS expects copper to potentially test the $5,000 a tonne level.
China’s factory sector unexpectedly shrank for the first time in nearly 2-1/2 years in January. Three-month copper on the London Metal Exchange had fallen 1 percent to $5,650 tonne by 0306 GMT. Prices hit the highest since Jan. 21 at $5,755 a tonne on Wednesday before closing with modest gains.
The most-traded April copper contract on the Shanghai Futures Exchange slipped 0.6 percent to 41,040 yuan ($6,562) a tonne.
Physical demand remains weak ahead of Lunar New Year in China, traders said, with consumer reluctant to stock up given slowing demand growth and ample supply expected in the world’s top user of metals.
LME nickel fell 1.5 percent, while lead and tin both dropped more than half a percent.
Tempering appetite for risk, the European Central Bank abruptly cancelled its acceptance of Greek bonds in return for funding on Wednesday, shifting the burden onto Athens’ central bank to finance its lenders and isolating Greece unless it strikes a new reform deal. Meanwhile, Southern Copper Corp said on Wednesday that quarterly net income fell 14.3 percent as sales slipped on lower metal prices.
Sales fell 4.2 percent year-on-year in the quarter as weaker metal prices offset a 9.2 percent rise in copper output. Southern Copper has said it would likely produce 758,000 tonnes this year.
(AGENCIES)
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