RTRS:METALS-Copper cuts gains on weak China factory data
* LME copper up 0.2 pct, well off session highs
* China flash PMI at 32-month low, may spur monetary easing
* Coming Up: U.S. durable goods orders, 1330 GMT
(Adds details, updates prices)
By Manolo Serapio Jr
SINGAPORE, Nov 23 (Reuters) - Copper trimmed gains on
Wednesday after data showing factory activity in top consumer
China fell to its lowest in 32 months, but hopes that the weak
numbers may prompt Beijing to relax monetary policy kept the
metal firm.
The HSBC flash manufacturing purchasing managers' index, the
earliest indicator of China's industrial activity, slumped in
November to 48, a low not seen since March 2009, rekindling
worries that the country may be slipping towards an economic
hard landing.
"It's a weak number and well below expectations. Copper
certainly trimmed gains on the back of it. We could see more
weakness in prices later in the day, but this data must spur the
Chinese authorities to loosen policy," said Nick Trevethan,
senior commodities strategist at Australia and New Zealand Bank.
ANZ now expects China, the last hope for commodities in the
face of weaker developed economies, to cut banks' reserve
requirement ratio "by the end of this month or early next"
following the poor PMI data which should eventually support
demand for copper, said Trevethan.
Three-month copper on the London Metal Exchange rose
0.2 percent to $7,342.75 a tonne by 0352 GMT, extending modest
gains from the previous session, but well off the day's peak of
$7,462.75.
In Shanghai, the most-active February copper contract
slipped 0.4 percent to 54,780 yuan ($8,600) per tonne.
Already, China's central bank has cut reserve requirements
for five rural banks as part of efforts to support the rural
economy, two sources with knowledge of the matter said on
Tuesday, fuelling expectations the big banks may be next.
China has been raising interest rates and the reserve
requirement ratio for banks to tame inflation, but an easing in
consumer price rises in October has given Beijing room to
fine-tune policy to support economic growth.
With the United States and Europe preoccupied with
addressing heavy debt, investors are relying on Chinese demand
to boost prices of commodities such as copper, which is down
more than 23 percent this year, its first annual decline since
2008.
Despite tighter credit, China's imports of refined copper
rose 7.2 percent in October from September to hit an 18-month
high, fuelled by steady demand.
And some analysts say China may still be able to afford a
soft landing notwithstanding the latest PMI data.
The next policy step may be broader measures to prevent a
severe downturn, said Tony Tong, a strategist at Everbright
Group in Hong Kong.
"A hard landing is unlikely to be seen as we also expect the
government will adjust its policy to enhance a soft landing," he
said.
Base metals prices at 0352 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7342.75 12.75 +0.17 -23.51
SHFE CU FUT FEB2 54780 -200 -0.36 -23.76
LME Alum 2075.00 5.00 +0.24 -15.99
SHFE AL FUT FEB2 15945 -10 -0.06 -5.31
HG COPPER DEC1 331.50 -1.80 -0.54 -25.33
LME Zinc 1931.25 -8.75 -0.45 -21.30
SHFE ZN FUT MAR2 15180 00 +0.00 -22.05
LME Nickel 17650.00 100.00 +0.57 -28.69
LME Lead 2018.00 -1.50 -0.07 -20.86
SHFE PB FUT 15340 -5 -0.03 -16.40
LME Tin 20800.00 0.00 +0.00 -22.68
LME/Shanghai arb -180
Shanghai and COMEX contracts show most active months
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
