London - Copper prices steadied on Wednesday, rebounding from three week lows hit in the previous session, helped by a strong euro but further gains were capped as buying from top consumer China remained subdued this week.
Benchmark three-month copper on the London Metal Exchange (LME) was at $8,045 tonne at 12:21 SA time, trading flat from a close of $8,050 a tonne on Tuesday when it fell in intraday trade to its lowest level since January 29 at $8,043.
Keeping prices supported was a rise in the euro against the dollar as investors were reassured by data in the previous session showing strong improvement in German economic sentiment.
A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
But physical trade from China - which accounts for 40 percent of global copper demand - remained quiet, with some manufacturers yet to ramp up after the Lunar New Year holiday, suggesting prices may have further to fall, market sources said.
Copper hit a four-month peak of $8,346 in early February but has since struggled to gain traction. It is trading 1.2 percent lower so far this month.
“What we have seen so far is a relatively subdued pace since the Chinese have come back and we haven't seen prices take off
at all,” said Ross Strachan, economist at Capital Economics.
“One of the key elements to look for is the flash PMI for China and euro zone, and that could be interesting data. We have seen many of the PMIs improve in recent months and it would be interesting to see whether they continue to pick up.”
The euro zone manufacturing and services PMI figures are expected on Thursday while China's flash HSBC manufacturing PMI
numbers are due on Monday.
Chinese traders, worried about fresh curbs on property markets, returned from the Lunar New Year break this week to find LME copper had not made any gains, encouraging further copper sales, said Chunlan Li, a Beijing-based analyst with metals consultancy CRU.
China is set to expand its property tax programme, state news agency Xinhua said on Wednesday, in the government's latest bid to cool frothy home prices.
Copper is widely used in the power and construction sectors.
“For the physical market, I expect demand will remain quiet until next week because many downstream users like copper cable manufacturers and small copper rod producers have not come back to work. Only after the Lantern Festival will it pick up,” she
said.
China's Lantern Festival falls on January 24 and marks the end of the lunar new year festivities.
FED IN FOCUS
The market is expected to closely monitor policy direction from the US Federal Reserve, which is set to release minutes
of its Federal Open Market Committee meeting after markets close on Wednesday.
The Fed will likely need to keep buying bonds until the end of this year given the still-feeble state of the US labour
market, a top Fed official told Reuters on Tuesday.
Also in focus is Italian polls on February 24-25, where the outcome is still deeply uncertain.
In industry news, miner BHP Billiton appointed its non-ferrous business head Andrew Mackenzie as its new chief executive to replace Marius Kloppers, as it reported an expected 43 percent drop in half-year profit. It also took a $3 billion charge on its alumina and nickel assets.
Benchmark aluminium climbed to $2,113.75 from Tuesday's close of $2,111, while zinc rose to $2,158 from $2,155.
Three-month tin was at $23,850 from Tuesday's close of $23,905 while nickel was at $17,270 from $17,390.
Lead rose to $2,386 from a last bid of $2,375 on Tuesday. - Reuters