MSN:Copper steadies as dollar falls; euro crisis subdues
LONDON/SHANGHAI (Reuters) - Copper was steady on Tuesday, supported by a fall in the dollar but also pressured by concerns about the euro zone's debt problems as Spanish and Italian bond yields spiked, while trading was muted ahead of a Federal Reserve policy meeting.
Three-month copper on the London Metal Exchange was almost flat at $7,503 a tonne by 0553 EDT. It closed at $7,510 on Monday after earlier hitting $7,615, its highest since May 30, after the election victory of Greece's pro-bailout parties.
"Metals started the week on a supportive note, but concerns have turned back to Spain with a rise in government bond yields. It's sentiment driven," Barclays analyst Gayle Berry said.
"Over the past few months we've seen a more decisive shift in market position from light and neutral to now being on the short side on increased concerns about the European sovereign debt situation and Chinese growth."
Spain's short-term borrowing costs rose to their highest level since 1997 in a debt sale on Tuesday as investors worried the country will soon be forced to ask for international aid.
Those concerns offset more positive news that Greece's conservatives were expected to form a coalition government with the Socialists on Tuesday, allowing the two parties that dominated politics for decades to share power.
"The benign outcome of the Greek election was a non-event for commodity prices, which had preemptively risen last week," RBS said in a research note.
Investors were also cautious before a two-day Federal Reserve policy meeting is to begin later on Tuesday. Investors expected the Fed to announce some form of monetary easing this month - a belief that also helped to put a floor under prices.
The dollar fell against a basket of currencies. A weaker dollar makes commodities priced in the unit less expensive for holders of alternative currencies.
SLUGGISH
In the physical market, traders said copper demand in top consumer China was sluggish.
"We feel a marked slowdown in demand for our products this year as compared to the same period in previous years. Domestic demand is slowing, and so is Europe's demand for China's exports," said an executive with a top Chinese copper fabricator.
"Other than the electronics industry, which is still doing OK, the rest of our downstream clients are struggling. The government's infrastructure spending has not started to benefit our clients in the construction industry yet."
Copper is used extensively in construction and power.
Although liquidity was gradually easing and Beijing has approved a number of infrastructure projects, industry participants said its impact on copper markets would only be felt late in the third quarter or towards the end of the year.
Tin was down 0.1 percent $19,475 from $19,500 at the close on Monday while zinc was down 0.1 percent at $1,877 from $1,880.
Lead was at $1,898 from $1,895 and aluminum was at $1,898.50 from $1,930.
