SHANGHAI: London Metal Exchange copper fell by 2.4 percent on Tuesday, giving up some of the overnight gains that together with a surge in Asian
share prices had helped Shanghai copper futures rise by their 4 percent daily limit. Asian shares rose nearly 3 percent, heading towards a consecutive third day of gains, after the U.S. rescue of Citigroup bolstered badly needed confidence in the broader banking sector.
Analysts said, however, that the price rally in metals is not likely to be long lived, with scant positive news from the fundamental side. "The thing that will sustain it will be to actually see some positive economic data coming out. We're seeing just a short-term positive swing in sentiment in equity markets and it's flying through the commodity markets," ANZ senior commodities analyst Mark Pervan said. "We really need to to see some more fundamental demand statistics to sustain the rally and I don't think that's going to occur for the next three to six months," he said. The key Shanghai futures contract opened at 27,900 yuan ($4,086) a tonne, 4 percent higher than its settlement price on Monday, before retreating slightly to 27,730 yuan at the midday break.
Shanghai copper prices were encouraged by a 6 percent gain in London copper in the previous session on the back of higher U.S. stocks. President-elect Barack Obama promised on Monday to jolt the faltering U.S. economy, which pushed the Dow Jones industrial average up nearly 400 points on Monday, while the S&P 500 and Nasdaq soared more than 6 percent, capping the best two-day run since the aftermath of the 1987 stock market crash. But the bad economic news is likely to keep rolling in, with U.S. consumer confidence for November due at 1500 GMT.
A Reuters survey calls for a slight decline to 37.9, from 38 in October, which would be the lowest on record. London Metal Exchange copper for three month delivery fell 2.5 percent, or $95, to $3,655 a tonne by 0332 GMT, as investors booked profits and the dollar gained against the euro. The euro eased to $1.2840 after hitting a two-week high in New York as risk aversion eased after the U.S. government agreed to inject $20 billion of new capital into Citigroup. "Prices are very volatile and dealers tend to do more arbitrage trading rather than holding positions for a long time because market uncertainties are still there," said a futures dealer for one of the major copper smelters in China.
Australia-listed miner Oz Minerals Ltd became the latest miner to to cut production as
falling prices squeeze margins. It will slash output at the world's second-largest zinc mine, delay copper and gold projects and is renegotiating its debts.
