--Stronger stock futures stoke interest in risky assets like copper
--Citi raises 2012 copper forecast to $3.85/lb from $3.55/lb, cuts 2013 outlook to $3.80 from $3.87.
By Tatyana Shumsky
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Copper futures were near steady Monday as firmer equity futures and recent price declines lured investors to the market in search of bargains.
The most actively traded contract, for May delivery, was recently 0.40 cents, or 0.1%, higher at $3.6310 a pound on the Comex division of the New York Mercantile Exchange.
Copper futures slumped to a three-month low Friday, as investors flocked to the safety of dollar-denominated cash amid concerns about slower growth in China and signs that Europe's sovereign debt problems were spreading to Spain.
However, a more upbeat tone in equity futures, which firmed ahead of the U.S. stock market open, fanned demand for growth sensitive assets like copper. Copper and stocks tend to move in tandem as both asset classes are seen as riskier investments.
The cost of protecting Spanish government debt against default hit a record Monday, on fresh concerns the euro zone's fourth-largest economy won't be able to meet its debt obligations.
"As risk premiums rise, particularly for Spanish government bonds, market players are turning their attention once more to the sovereign-debt crisis in the euro zone. The resulting increase in risk aversion has caused the U.S. dollar to appreciate, which in turn is weighing on metal prices," analysts at Commerzbank said in a note.
Elsewhere, Citi Investment Research adjusted its copper price outlook for the next three years. The bank raised its average copper price forecast for 2012 to $3.85 a pound, from $3.55 a pound previously.
However, Citi now expects copper prices to average at $3.80 instead of $3.87 in 2013, and to slide to $3.61 in 2014, versus previous forecasts of $3.72 a pound.
"The prospect of a return to the high levels of Chinese auto production growth seen in 2009 and 2010 looks remote to us," Citi said. Hopes of a boost in construction activity are "overplayed," the bank added, as "it is now reported that new unsold property is being reclassified as economic housing in order to assist in meeting the central government's volume targets."
The industrial metal is widely considered an economic bellwether because of its widespread applications in manufacturing, construction and electronics. As economic activity slows, demand for such goods tends to recede, damping the need for copper.
Moreover, "the lack of any rebound in [U.S.] construction activity means copper demand will remain well below pre-crisis levels," Citi said.
-By Tatyana Shumsky, Dow Jones Newswires; 212-416-3095; tatyana.shumsky@dowjones.com
