RTRS: Metals prices start month higher, outlook stays weak
By Nick Trevethan
SINGAPORE (Reuters) - Metals markets rose in London and Shanghai on Monday, with copper gaining more than 3 percent after its weakest monthly performance in at least 35 years in October, but dealers said the outlook remained pessimistic.
"Markets have bounced, tracking equities higher, but I suspect we may be reaching the limits, though copper has been incredibly volatile, trading in $1,000-ranges," a trader in Hong Kong said.
"People get carried away, not wanting to lose out on a rally, but my feeling is this will be short-lived and weakness is likely to return."
Copper for delivery in three months on the London Metal Exchange rose 3.2 percent to $4,230 a tonne by 0355 GMT.
Last month, LME copper fell nearly 36 percent, its biggest drop since at least 1970 and possibly in the exchange's 130-year history of copper trading.
A fall in the dollar versus the euro ahead of another round of interest rate cuts this week by the world's major central banks gave a lift to sentiment, as did firmer equity markets.
The MSCI index of stocks in the Asia-Pacific region outside Japan rose 4.8 percent, up for a fifth consecutive session after dropping 24.6 percent in October for its biggest monthly decline in the gauge's 20-year history.
For flashcard charts showing monthly market moves in a range of metals and indices, please click:
"I don't see any dramatic turnaround this month in commodities. Manufacturing is slowing in China. Industry is slowing down and for the next couple of weeks at least there is no light at the end of the tunnel," said Peter McGuire of Commodity Warrants Australia.
He added that U.S. Presidential elections on Tuesday, and the winner's comments on the economy, would be keenly watched.
"It will be interesting to see how the winner manages to kick start the manufacturing sector. Regardless of who gets in, rising unemployment, slowing production and the 12 million homes with negative equity, will mean huge risks to the United States right though the first half of next year."
Shanghai zinc futures jumped by their 4 percent daily limit to 9,445 yuan in early trade. Shanghai zinc tumbled 36 percent in October, the biggest fall in the contract's history as a firmer dollar and fears of slowing demand in the face of a global economic slowdown weighed on sentiment.
"Zinc is up by its limit, but physical inventories in southern China are high," a trader in Shanghai said.
"Small producers have cut output by perhaps 50,000 tonnes but that isn't enough to offset weak auto sales and zinc producers will continue to suffer for the next one or two years."
Shanghai January copper rose 3.8 percent to 32,580 yuan.
Domestic copper prices got a lift on Monday after data on Friday showed Shanghai exchange stocks fell more than 6,000 tonnes or 17.5 percent last week, but in general, fundamental factors are taking a backseat to the broader influences.
"In the short term, the fundamentals are lost in the noise from the dollar, news from United States, including the election and of course, equities," the Shanghai trader said.
