Copper rebounded on Tuesday from a 14-month low hit in the previous session on renewed expectations that European policymakers will act to contain a regional debt crisis.
Benchmark copper on the London Metal Exchange (LME) rose by nearly 2 percent to $7,403 a tonne by 11:00 SA time after having tumbled on Monday on recession fears.
The metal used in power and construction has fallen more than 25 percent since hitting a record high of $10,190 in February.
“There is a bit of improved sentiment after all these rumours about a big solution,” Danske Bank analyst Arne Lohmann Rasmussen said, referring to the euro zone debt crisis. “It's a bit of risk on but (there is) cautiousness. We might also see a bit of short-covering.”
Tin prices were also given a boost by the decision by smelters in Indonesia's main tin-producing region of Bangka island to impose a full export ban on tin ingot from October 1 until global prices recover.
Three-month tin jumped 5 percent, while tin premiums for delivery to Europe from the Kuala Lumpur market leapt to $1,180.
A multi-session commodity rout, triggered by fears of the euro zone's debts, began last week shortly after the US Federal Reserve warned of significant downside risk to the world's biggest economy.
Since then, policymakers seemed to have heeded investors' calls for more measures to calm the markets. Sentiment improved on news that euro zone officials were working to boost the firepower of the region's rescue fund.
European shares climbed to their highest in nearly a week, but the euro lost ground against the dollar after Spain's Economy Minister said there were no plans on the table to extend the euro zone's bailout fund almost sevenfold to 2 trillion euros.
The single currency had recovered on talk policymakers were planning to boost the size of the regional bailout fund, halve Greece's debts and recapitalise banks.
The dollar was down against a basket of currencies . A weaker dollar makes commodities such as metals cheaper for holders of other currencies.
UNDER PRESSURE
Recent data showed the US and euro zone economies face significant pressures. Sales and prices of new single-family US homes fell in August despite historically low mortgage rates.
“Weekly data show that the net position of investors in copper has turned from net long to net short, reflecting the negative market view,” Credit Suisse said in a note.
“Given that economic indicators such as yesterday's German Ifo Index continue to indicate a continuation of the slowdown, we think risks remain skewed to the downside near-term. However with positioning now being net short, it is also likely that the largest part of the sell-off might be behind us.”
Copper stocks at LME-approved warehouses rose 3,825 tonnes to 467,400 tonnes, latest data showed.
“This could be the first warning sign that we are actually going to see now some fundamental effect from this crisis,” Danske Bank's Rasmussen said.
“Does the jump in stocks reflect a weaker demand? That is a very worrying sign, but I think it's far too early top conclude that.”
Among other metals, lead , which earlier jumped 5 percent, traded at $1,960 from $1,877 a tonne at the close on Monday.
A recent fall for international lead prices has brought the gap over domestic Chinese prices to its narrowest since May, which could see smelters increase imports of lead concentrates for October-December arrival, traders and smelter sources said on Tuesday.
Zinc traded at $1,924 from $1,880 a tonne on Monday.
Aluminium traded $2,232 from $2,204 a tonne at Monday's close.
Nickel traded at $18,649 from $18,000 a tonne. Tin was at $21,200 from $20,325 a tonne. - Reuters