London copper climbed more than 1 percent on Friday, on track for its first weekly rise in seven, on expectations central banks will inject liquidity should the results of weekend elections in Greece unleash havoc in financial markets.
Another set of weak US economic data also raised hopes the Federal Reserve would be more open to support a slowing economy, a move that would support risk assets, weigh on the dollar and make dollar-priced metals cheaper for non-US investors.
“It seems markets are positioning for the Fed to announce some form of quantitative easing. You need a weaker dollar; that's the only reason metals will pick up. Markets already assume Greece will be out of the euro at some point,” Citi analyst David Wilson said.
Three-month copper on the London Metal Exchange traded up at $7,520 a tonne in official midday rings from a close of $7,420. It is up for a second straight day and headed for a gain of around 2.5 percent for the week.
The euro was down, after making gains earlier in the day, as analysts warned about Spain's elevated borrowing costs and the risk of contagion to Italy, the euro zone's third-largest economy.
But Spanish and Italian bond yields fell thanks to G20 comments that central banks from major economies were ready to provide liquidity and prevent a credit squeeze should Greece exit the euro zone.
European Central Bank President Mario Draghi said earlier the euro zone economy faced serious risks and no inflation threat, in comments that heightened expectations the ECB could cut interest rates or take other policy action soon.
Expectations of more monetary stimulus were also boosted by a British plan to flood its economy with cash.
“Base metals have been caught in a malaise caused by the European crisis followed by somewhat slowing growth in China and the US We look for more sideways (or) down action as we head through the summer. Overall, our expectation is these depressed prices will, however, prove to be good value as we head into year-end,” said RBC Capital Markets in a note.
In industry news, the Hong Kong stock exchange agreed to pay 1.4 billion pounds ($2.2 billion) to buy the LME in a deal that gives Asia's largest bourse a much needed entry into a commodities trading platform and brings LME members closer to China, the world's biggest metals buyer.
TWIDDLING THUMBS
In China, efforts may be underway to roll out more policies to stimulate growth, including more interest rate cuts, although a costly stimulus budget may not be on the cards.
China's spot copper demand has improved from previous months but remains at low levels, traders said.
“There's nothing much happening lately. No one really wants to buy, and no one really wants to sell. We are twiddling thumbs here,” said a Shanghai-based physical trader.
Copper has fallen by more than 14 percent from its 2012 peak of $8,765 touched in February.
Deterring producers from selling are the fact that charges are low for spot treatment and refining (TC/RC), fees paid by miners to smelters to turn their concentrate into refined metal.
“Spot copper TC/RC in Shanghai has been hovering around $30-$40 per tonne and 3-4 cents per lb for a few months now. It is extremely low and smelters' profits are squeezed by this along with lower refined copper prices. They have less incentive to sell now,” the physical trader said.
In other metals, soldering metal tin was untraded in rings but last bid at $19,500 a tonne from $19,625, while zinc, used in galvanising, traded at $1,902 from $1,892.
Battery material lead traded at $1,930 a tonne from $1,920, while aluminium was last bid at $1,951 from $1,954, having earlier hit its
lowest since July 2010 at $1,950. Stainless-steel ingredient nickel traded at $16,655 from $16,635.
In industry news, China's top aluminium producing province of Henan may subsidise electricity used by loss-making smelters in a bid to spur local growth, a tactic other provinces could adopt, helping to keep production strong and limiting imports. - Reuters