* Copper reverses direction, falls 10 pct in volatile trade
* Global demand worries and rising stocks dent sentiment
(Updates prices, adds analyst comment)
By Anna Stablum and Michael Taylor
LONDON, Oct 30 (Reuters) - Copper fell by 10 percent on
Thursday as rising London Metal Exchange stocks halted this
week's short-covering rally in industrial metals and
recessionary worries returned.
The U.S. economy shrank at a 0.3 percent annual rate in the
third quarter, its sharpest contraction in seven years on rising
fears that recession was setting in. [ID:nN29534671]
Also hitting sentiment, the U.S. dollar hit session highs
against the euro, after trading lower for most of the global
session, as investors bought back the greenback to rebalance
portfolios for month-end purposes. [ID:nN30255518]
"We have never seen moves like this before...it is uncharted
territory," said Kevin Norrish, analyst at Barclays Capital.
He said the extreme price volatility was related to
macro-economic concerns, huge movements in interest rates and
exchange rates and very low levels of liquidity.
"What we have seen over the last few days is a
short-covering rally in a situation where people are still very
negative about the outlook," Norrish said.
Three-months copper MCU3 fell 10 percent to an intraday
low of $4,190 a tonne after LME stocks came in at 223,875
tonnes, up 6,575 tonnes.
Higher stocks reminded investors that demand for industrial
metals is falling sharply and prices turned lower after rising
by 3.5 percent to a one-week high of $4,820 earlier.
"It was just a short blip, we are still in a downtrend and
prices will definitely head lower now," an LME ring dealer said.
At 1558 GMT, copper -- seen as a key gauge of real economic
activity -- was at $4,220, down from $4,655 at the close on
Wednesday, when it surged 12.6 percent.
Prices have risen around 13 percent so far this week as
investors covered short positions, but for the month prices are
still down 30 percent, which at the end of the month could be
the biggest fall in at least three decades.
"Focus is still on China, and there is a lot of concern
about the potential of further big declines in export levels and
debate over the extent of the stimulatory measures that have
been announced if they will really help," Norrish said.
On Monday, copper prices dipped to $3,590 a tonne, their
weakest for more than three years.
"The volatility is quite large and the jump up in copper in
the morning reflects that," said Justin Lennon, a copper analyst
at Mitsui Bussan Commodities in New York. "We have two months
for the rest of the year...I see copper going lower. After that
in the first quarter, it'll probably bounce back."
Nickel MNI3 surged 14 percent on Wednesday as short
positions were covered but, like the other metals, prices fell
on Thursday to a low of $11,900, down 12.8 percent.
It was last at $11,950 against $13,640 on Wednesday.
Lead MPB3 dropped, down 8.5 percent to a low of $1,445
before tracking back to $1,460 versus $1,580.
Zinc MZN3 stocks also came in higher at 182,100 tonnes,
sending prices to a low of $1,145 a tonne. It was last at
$1,155, down 8.3 percent versus Wednesday's $1,260.
Britain's leading FTSE share index .FTSE was 0.9 percent
lower, as Kazakh copper producer Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz) said it may
cut copper output next year due to lower projected spending
arising from global financial instability. [ID:nLU479707]
Producers have started to cut back production across metals
as falling prices put profit margins under pressure.
"All these producer cutbacks are bearish as it really shows
how bad the demand picture is," said another LME ring trader.
"But of course once demand picks up again it will create
tight supplies with potential for another bull run," he said.
In other industry news, Russia's richest man, Oleg
Deripaska, became the first beneficiary of a Kremlin-backed
rescue package when his flagship company secured a $4.5 billion
loan needed to keep its stake in Norilsk Nickel (GMKN.MM: Quote, Profile, Research, Stock Buzz).
LME tin MSN3 shed 6.1 percent to $14,300 against
Wednesday's close of $15,225. Tin prices are up about 50 percent
since plunging to a 21-month low of $10,300 on Oct. 24.
In contrast to most other metals, tin stocks have dropped 75
percent since August last year to 3,770 tonnes.
Copper stocks have risen by 80 percent in the same period.
Aluminium MAL3 was 3.7 percent lower at $2,071, down from
$2,151 on Wednesday.
Metal Prices at 1607 GMT
Metal Last Change Pct Move End 2007 Ytd Pct
move
LME Cu 4240.00 -415.00 -8.92 6670.00 -36.43
SHFE Cu* 33100.00 1280.00 +4.02 56880.00 -41.81
LME Alum 2065.00 -86.00 -4.00 2403.00 -14.07
SHFE Alu* 14455.00 260.00 +1.83 18180.00 -20.49
COMEX Cu** 191.10 -16.95 -8.15 303.05 -36.94
LME Zinc 1160.00 -100.00 -7.94 2370.00 -51.05
SHFE Zinc* 9515.00 290.00 +3.14 18950.00 -49.79
LME Nick 0.00 -13640.00 -100.00 26350.00 -100.00
LME Lead 1460.00 -120.00 -7.59 2550.00 -42.75
LME Tin 14350.00 -875.00 -5.75 16400.00 -12.50
** 1st contract month for COMEX copper
* 3rd contact month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
(Additional reporting by Nick Trevethan in Singapore,
editing by Editing by Peter Blackburn)
