London - Copper dipped on Monday as investors lost enthusiasm for a last-ditch 10 billion euro bailout deal reached by Cyprus and international lenders, and focused on disappointment with modest demand growth from top consumer China.
Also weighing on the metal, the latest London Metal Exchange data showed copper stocks in official warehouses rose 2,875 tonnes to 565,350 tonnes, their highest level in nearly 10 years.
Added to this, data on Friday showed copper stocks monitored by the Shanghai Futures Exchange hit their highest in nearly 11 years, indicating demand in China, which consumes 40 percent of the world's copper, remains subdued.
Three-month copper on the London Metal Exchange had dipped 0.16 percent to $7,643 a tonne by 1015 GMT.
Prices have recovered by more than 2 percent from the lows plumbed a week ago, but are still down 3 percent for the year.
Cyprus clinched a last-ditch deal with international lenders early this morning to shut down its second-largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians, in return for a 10 billion euro ($13 billion) bailout.
After initial relief at the news, investors grew weary, acutely aware that unlike previous peripheral euro zone country bailouts, the Cyprus deal tapped individual bank deposits, which up to now have been protected.
“European banking regulators are trying to establish the principal of a banking union, and they've undermined it by saying in special cases we can ignore these rules and depositors at banks can be hit,” said Nic Brown, head of commodities research at Natixis.
Investors are now awaiting China's March PMI and US durable goods data, due early next week, for further clues on demand prospects in the world's top two economies, which together consume about half the globe's copper supplies.
HUGE SHORTS
For now though, traders remain mixed on copper's next step - its demand fundamentals are worsening due to swelling supply but the dominance of short or sell position holders signals that any rally could ignite a vicious round of short-covering.
“I am going for up now. Price action in the past two weeks has showed a base in metals. Soon shorts will cover, but copper will be capped at $7,900 to $8,000,” said a Singapore based trader. “If it happens, it's going to happen fast.”
Hedge funds and money managers raised their bullish bets in gold by 63 percent and added their net short position in copper to a fresh 4-year high in the week to March 19, Commodity Futures Trading Commission data showed on Friday.
In other metals traded, soldering metal tin edged up 0.22 percent to $22,975 a tonne, while zinc, used in galvanizing fell 0.51 percent to $1,942 a tonne.
Battery material lead rose 0.22 percent to $2,193.75 a tonne, aluminium fell 0.49 percent to $1,937.50 a tonne, while stainless-steel ingredient nickel fell 0.35 percent to $17,085 a tonne. - Reuters