Copper edged up on Monday bolstered by a weak dollar, a decline in economic gloom in Europe, and better growth prospects in top consumer China, though gains were capped by worries about rising Chinese stockpiles.
The euro climbed to its highest against the dollar since February 2012, sustaining last week's rally after European Central Bank President Mario Draghi gave a more optimistic outlook for the economic recovery.
A weaker dollar makes commodities priced in the greenback cheaper for holders of other currencies such as the euro.
Global shares, seen by some as a proxy for growth, were near 18 month highs meanwhile, amid signs of a growth pickup in recent data from the United States and China, which boasted stronger-than-expected exports and imports in December.
“The fact that some macro data from China has been more constructive is a positive for the copper demand outlook. That's key for the first few months but as the year unfolds people are anticipating an increase in copper supply,” said Macquarie analyst Duncan Hobbs.
Three-month copper on the London Metal Exchange rose 0.50 percent to $8,085 a tonne by 13:00 SA time, after falling as much as 1 percent on Friday.
Latest LME data showed copper stocks in exchange registered warehouses fell by 725 tonnes to 329,725 tonnes, though they remain near their highest levels in about a year, indicating growing global supplies and still tepid demand.
Copper hit a 2-1/2-month high near $8,300 early in January as risk assets rose after the United States averted a fiscal crisis of steep tax increases and spending cuts.
But prices have since retreated on expectations that the US Federal Reserve may rein in easing measures sooner than expected, and ahead of more US debt ceiling negotiations that are set to take place in coming months.
“It is becoming evident at least in copper's case that a move to new highs (circa $8,500) may not be in the cards anytime soon. Each time this market looks like it's ready to shake off the year long range trade, it fails miserably to impress. Look for talk about the US debt ceiling to be the next thing to smother enthusiasm,” said RBC Capital Markets in a note.
SWELLING CHINESE STOCKPILES WEIGH
Also weighing on copper are weak Chinese imports, with data last week showing they fell 6.6 percent in December from the previous month, indicating the country is well stocked.
Analysts estimate copper stocks in bonded warehouses in China are anywhere between half a million to over a million tonnes. Meanwhile copper stocks on the Shanghai Futures exchange are near their highest since late April 2012.
“Given record high levels of inventory at bonded warehouses, we believe it could take some time for China to destock copper as our inventory model reveals that destocking activity has been quite modest,” Deutsche Bank said in a note.
Looking ahead, China's gross domestic product data, due out on Friday, will be the key number to watch as investors seek confirmation of whether the world's No. 2 economy snapped seven quarters of slower growth in the fourth quarter.
A Reuters poll expects China's economic growth to have quickened to 7.8 percent in the fourth quarter from 7.4 percent in July-September.
“Chinese inflation numbers (have) surprised to the upside. This is spurring concerns that authorities might adopt more restrictive economic policies. In this context, the focus this week will be on Chinese industrial production and GDP growth. Further evidence that Chinese growth has bottomed should help to lift sentiment again,” said Credit Suisse in a note.
In other metals traded, soldering metal tin rose 0.40 percent to $25,000 a tonne, zinc, used in galvanizing rose 0.43 percent to $2,024, while aluminium rose 0.50 percent to $2,108 a tonne.
On aluminium, Triland said in a note: “The fact prices were (last week) unable to revisit the top of the range from last December showed that participants are still highly cautious despite renewed optimism from Europe and the US this week.”
Elsewhere, battery material lead rose 0.16 percent to $2,309 a tonne, while stainless-steel ingredient nickel edged up 0.03 percent to $17,555 a tonne. - Reuters