RTRS:METALS-Copper falls as Fed stimulus hopes wane, Spain in focus
* Investors reassess likelihood of strong Fed stimulus
* Sources say Spain in talks over sovereign aid
* Copper open interest lowest in 5-1/2 yrs
By Harpreet Bhal
LONDON, Aug 24 (Reuters) - Copper fell on Friday as doubts about the
likelihood of strong stimulus measures from the U.S. Federal Reserve kept
investors cautious, and as signs that Spain may need sovereign aid intensified
concerns about the euro zone debt crisis.
Three-month copper on the London Metal Exchange slipped from a
one-month high hit in the previous session, dropping 0.5 percent to $7,650 a
tonne at 0921 GMT, from Thursday's close of $7,684.50 a tonne.
The metal used in power and construction is on track to post a 1.4 percent
weekly rise.
Mixed messages from Fed officials on Thursday, with one playing down the
odds of imminent bond buying saying the U.S. economic outlook had brightened and
another seeing a lot of reason for more easing, led investors to scale back
their expectations of strong stimulus from the Federal Reserve.
"After the initial thoughts from the Fed statement yesterday, we saw some
short covering (in metals markets) and that has run its course now," said Gayle
Berry, analyst at Barclays Capital.
"We're not at the point yet where the market's views have changed to add
fresh longs as there are still negative headlines out there."
Trading volumes were light due to the Northern Hemisphere summer holidays
when large parts of the industry in Europe shut for annual maintenance.
Reflecting a lack of conviction about copper's short-term price direction,
the open interest in the LME copper contract dropped to a 5-1/2 year low
"It'll take a lot of conviction to get fresh longs to come in at this point,
so we will be facing pressure from the shorts today," said an analyst with an
international trading firm, who declined to be identified as he was not
authorised to speak to the media.
Renewed concerns about the sovereign debt crisis in the euro zone also kept
sentiment cautious following news that Spain was in talks with euro zone
partners over sovereign aid, although it has not made a final request for a
bailout, three sources with knowledge of the matter told Reuters.
The euro zone's fourth-largest economy is the latest hot spot in the
2-1/2-year euro zone debt crisis as concerns remain about its ailing banking
sector, which sought a 100-billion-euro European lifeline in June, and its
highly indebted regions.
Putting additional pressure on metals prices was a drop in the euro against
the U.S. dollar. A strong dollar makes commodities priced in the U.S. unit more
expensive for holders of other currencies.
CHINA EYED
Investors are keen to see signs of further stimulus action from China to
help spur a pickup in copper demand in the country that consumes around 40
percent of global refined copper.
Latest figures showed copper inventories in warehouses monitored by the
Shanghai Futures Exchange rose 1.8 percent from last Friday.
Although the manufacturing sector in the world's second-largest economy
contracted at its sharpest pace in nine months in August, market watchers are
ruling out a previously expected cut in banks' required reserve ratio after the
Chinese central bank injected a seven-month high amount of funds into the
financial system.
Benchmark aluminium slipped to $1,896.50 a tonne from Thursday's
close of $1,904. Zinc fell to $1,848 from $1,862 and lead was
flat at $1,952 a tonne.
Nickel slipped to $16,377 from Thursday's close of $16,475. Tin
rose to $20,015 a tonne from $19,950, supported by concerns about a
supply shortfall from Indonesian producers.
Metal Prices at 1005 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2011 Ytd Pct
move
COMEX Cu 347.45 -1.80 -0.52 344.75 0.78
LME Alum 1899.00 -5.50 -0.29 2020.00 -5.99
LME Cu 7647.50 -37.00 -0.48 7600.00 0.63
LME Lead 1957.25 5.25 +0.27 2034.00 -3.77
LME Nickel 16397.00 -78.00 -0.47 18650.00 -12.08
LME Tin 20070.00 120.00 +0.60 19200.00 4.53
LME Zinc 1853.75 -8.25 -0.44 1845.00 0.47
SHFE Alu 15355.00 -5.00 -0.03 15845.00 -3.09
SHFE Cu* 55740.00 -360.00 -0.64 55360.00 0.69
SHFE Zin 14635.00 -15.00 -0.10 14795.00 -1.08
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
