Copper bounced back from a five-day slide on Wednesday, with prices of the red metal boosted by the Federal Reserve's promise to launch more measures to help the fragile US economy.
Three-month copper on the London Metal Exchange (LME) climbed to $6,923.50 a tonne at 11:15 SA time compared with Tuesday's close of $6,800. The gains, which earlier saw copper rise some 3 percent to hit a session high of $7,009.75 a tonne, were in line with stronger equity markets in Europe.
Fed Chairman Ben Bernanke said on Tuesday the US central bank's policy committee considers inflationary pressures well under control and given high unemployment, would be ready to ease monetary conditions further following the launch of a new stimulus measure in September.
That brought some comfort to investors in risky assets that have dumped both commodities and equities in a market rout that saw copper slump in the five sessions to Tuesday on worries a deepening debt crisis in Europe could hit the global economy.
“This points to more risk appetite and after the strong losses over the recent week, it is logical to see some bounce back, probably on bargain hunting,” Commerzbank analyst Eugen Weinberg said.
“We are not out of the woods yet.”
European finance ministers agreed on Tuesday to safeguard their banks as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.
Hours earlier French-Belgian municipal lender Dexia became the first European bank to have to be bailed out due to the euro zone's sovereign debt crisis.
LME WEEK
Thousands of industry professionals are currently meeting for the annual London Metal Exchange Week, the premier fixture in the global metals calendar during which seminars, meetings and social events are held. An uncertain demand outlook, a shaky global economy, the recent slide in base metals prices and the possible sale of the LME are in focus during the week.
Industrial metals markets could become more volatile in the next year or so, as continued global economic uncertainty buffets prices, but medium term prospects remain strong, consultancy CRU Group said on Tuesday.
“While we think the fundamental backdrop for metals looks still fairly constructive, market's focus will remain on deleveraging pressures and economic indicators, for the time being,” Credit Suisse said in a note.
“In this context, the release of US nonfarm payrolls due on Friday will be watched closely.”
Weak US data is also likely to quickly take the heat out of copper. Data on Tuesday showed new orders for US manufactured goods decreased for the second time in three months, falling by 0.2 percent and failing to meet economists' expectations of a flat reading.
US data to be released later on Wednesday includes the ADP employment report for September and the Institute for Supply Management September non-manufacturing index.
China, the world's biggest consumer of copper, is away this week for a national holiday, but even prior to the break, the Chinese have not really aggressively bought the metal despite it falling to 14-month lows.
“I think the Chinese would start to think anything below $6,000 as an attractive opportunity for them to strategically rebuild stocks,” said Dominic Schnider, executive director for wealth management research at UBS.
Other metals tracked gains in copper, with aluminium trading at $2,194.25 from $2,174 a tonne and lead at $1,905 from $1,888 a tonne.
Zinc traded at $1,868 from $1,860 a tonne. Meanwhile nickel was at $18,695 from a closing bid of $18,700 a tonne and tin was at $20,801 from $20,995 a tonne. - Reuters
