LONDON, July 5 - Copper rallied on Monday, helped by dollar weakness, a stronger tone in equity markets, arbitrage buying in Shanghai and on the view that last week's drop had hit support.
Trade was quiet, however, due to a national holiday in the U.S.
Benchmark copper for three-months delivery on the London Metal Exchange traded at $6,490 a tonne at 0942 GMT from a close of $6,410 on Friday, having risen more than 2 percent earlier to $6,568, its highest since late June,
"There's been overnight arbitrage buying out of China. (Also), the U.S. currency is weaker, equities are higher so metals are taking their cue from those two factors," said Robin Bhar, an analyst at Credit Agricole.
"Last week was seen as the end of world again and it hasn't come to that. I can't see too much downside from here. If the market realises the U.S. economy is slowing it puts pressure on the dollar, which would be positive for metals."
Equity market, seen by some as a proxy for economic growth, drifted up in Asia with investors taking profit on defensive plays. Markets turned briefly negative in Europe, however.
The dollar steadied in subdued trade after hitting a near two-month low against a currency basket after soft U.S. jobs data late last week. A weaker dollar makes metals cheaper for European investors.
The U.S. jobs report on Friday compounded negative sentiment from below-consensus manufacturing surveys in the United States and China, and slowing euro zone manufacturing.
Copper ended up on Friday, however, on a weaker dollar.
"It's counter-intuitive, slowing growth is bad for demand but it's not so bad because metals are priced in dollars," said Bhar.
Trade data from China on Saturday was expected to show lower metal imports, although falls in Shanghai stocks and the opening of the arbitrage window in June could have enticed some buying.
"With the LME/SHFE arbitrage being largely supportive of Chinese imports since early to mid-May, we expect the trend in warrant cancellations in Asian LME warehouses to continue. This points to the likelihood of strong Chinese copper imports for the next couple of months," said Societe Generale in a note.
DEMAND TRENDS
Also helping copper, latest LME data showed copper stocks, a possible indicator of demand trends, continued to decline, falling 2,800 tonnes to 444,500 tonnes, their lowest since early December last year.
Among other industrial metals, zinc, the LME' worst performer this year, was at $1,816 a tonne from $1,775, having risen over 3 percent earlier to a day high of $1,840, its highest since late June.
The metal has been underpinned by rising premiums on physical trades in Europe and especially the U.S., where some of the stock in LME warehouse is said to be tied up in financing deals and unavailable to consumers.
Nickel was at $18,930 a tonne from $18,800, with the market overlooking news that Vale has resolved a year long strike at the company's nickel and copper operations in Sudbury and Port Colborne, Ontario.
Aluminium, used in transport and packaging, was flat at $1,942 a tonne, battery material lead was at $1,764 from $1,753 while soldering metal tin was at $17,150 from $17,240.
Metal Prices at 0947 GMT Metal Last Change Percent Move End 2009 Ytd Percent
move COMEX Cu 295.00 4.60 +1.58 334.65 -11.85 LME Alum 1935.00 -7.00 -0.36 2230.00 -13.23 LME Cu 6484.00 149.00 +2.35 7375.00 -12.08 LME Lead 1760.00 7.00 +0.40 2432.00 -27.63 LME Nickel 18775.00 -25.00 -0.13 18525.00 1.35 LME Tin 17025.00 -215.00 -1.25 16950.00 0.44 LME Zinc 1811.00 68.00 +3.90 2560.00 -29.26 SHFE Alu 14810.00 35.00 +0.24 17160.00 -13.69 SHFE Cu* 52420.00 70.00 +0.13 59900.00 -12.49 SHFE Zin 15145.00 130.00 +0.87 21195.00 -28.54 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
