Copper rose slightly on Monday on hopes for more monetary easing moves by top metals consumer China, but concerns that a euro group meeting may not yield concrete results for the region's economy kept gains limited.
China's annual consumer inflation came in at 2.2 percent, a lower rate than May's 3.0 percent, which left room for Beijing to ease policy without stoking upward price pressures and helped most commodities recover from the previous session's losses triggered by dismal US jobs data.
Three-month copper on the London Metal Exchange traded at $7,551 a tonne at 12:26 SA time, up 0.3 percent from a last bid of $7,530 a tonne on Friday.
But analysts said the boost to metals prices may prove short-lived, especially if Chinese gross domestic product figure this week shows that expansion is flagging in the world's second-biggest economy.
“Chinese inflation data showed a drop, so that might allow more easing to take place without causing inflationary pressures. More negative might be the GDP numbers since we had a rate cut last week. That could negative for copper,” Societe Generale analyst Robin Bhar said.
China is the world's top copper consumer, accounting for 40 percent of refined copper demand last year.
“The trend this week could be down. The euro is on its lows, and I think there could be more to come especially if today's (euro group) meeting disappoints,” Bhar added.
The euro hovered near a two-year low, and European shares fell on a darkening global growth outlook combined with low hopes of progress in Europe's debt crisis at a key meeting of finance ministers.
A weaker euro makes dollar-based commodities more expensive for holders of the single currency.
Copper prices earlier in the day sank to their lowest since late June at $7,486 a tonne and are not far from six-month lows of $7,219.50 in late June.
Copper prices have erased gains of more than 12 percent to trade in negative territory for the year.
“Reduced (US) quantitative easing expectations and warnings of slower activity in China are likely to weigh on overall metal sentiment in the coming sessions, particular as we head into the summer shutdown period,” Fastmarkets said in a note.
A build-out of social housing in China's eastern provinces suggest metals, many of which are near 2012 lows, represent value on a six-to-12-month time horizon, Goldman Sachs said in a note on Monday.
“We expect that a pick-up in Chinese activity, moderate US growth and a build-out of social housing will support metals from current levels ... prices across the complex generally present value to consumers ... assuming European 'containment',” it said.
The bank issued a buy recommendation for Sept 2012 aluminium call options, in particular, given the expected pick-up and its view that aluminium prices are low by historical standards.
“We believe aluminium calls are a good way to express our constructive view on aluminium ... A less leveraged way to trade this view would be to open a long September aluminium futures position with 15 percent upside to our forecast of $2,200/T,” it said.
Aluminium rose to $1,908.25 from a last bid of $1,896 a tonne on Friday.
In other metals, tin was at $18,600 from $18,500, while zinc, used in galvanising was at $1,850.50 from $1,844 a tonne on Friday's
Battery material lead was at $1,863.75 from $1,860, while nickel was at $16,313 from $16,150. - Reuters