Copper rose on Tuesday after better-than-expected German business sentiment eased some concerns about the health of Europe's largest economy, with a weak dollar helping cement gains for metals.
Three-month copper on the London Metal Exchange (LME) rose to $7,365.50 at 12:03 SA time, up from a close of $7,260 on Monday, although trading volumes have been tapering off ahead of the year-end holiday season.
German business morale rose sharply in December, defying expectations for a decline and underscoring the strength of the economy in the face of a sovereign debt crisis that has hammered growth in other euro zone members.
A rebound in the euro against the dollar also helped boost copper's gains. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
Copper prices have shed nearly one quarter of their value since the start of the year, on track for its first annual decline since 2008, as a deepening euro zone debt crisis has pushed investors to liquidate assets such as industrial metals.
Analysts warned sentiment could remain fragile towards the end of the year in the face of persistent caution about the euro zone crisis as investors grow weary about politicians' inability to contain the region's debt troubles.
“The German data was a little better than expected but it's not something that would turn the tide here. As far as the market is concerned they want a boost in the ESM (European Stability Mechanism) or for the ECB to become the lender of last resort,” said Andrey Kryuchenkov, analyst at VTB.
“It doesn't help that trading is very choppy and volatile because volumes are low. Most people would just prefer to stay away... in order to square their books before the year ends.”
Euro zone ministers agreed on Monday to boost IMF resources by 150 billion euros to ward off the debt crisis and won support for more money from EU allies, but it was unclear if the bloc would reach its 200 billion euro target after Britain bowed out.
The increase in the IMF resources was seen as a vital part of Europe's steps to prevent the debt crisis from spinning out of control given worries that the region's scheduled permanent bailout fund is too small to handle the debt problems.
“We would expect prices to be buffeted about by the news flow but in the absence of any major development we would look for further consolidation, with a downside bias as the technical indicators generally seem to be pointing lower,” FastMarkets said in a note.
ALUMINIUM STOCKS RISE
Aluminium stocks in LME-registered warehouses rose by 49,775 to a new record 4,922,800 tonnes. Some 28,875 tonnes flowed into warehouses in Detroit.
Aluminium rose to $1,981.83 a tonne from a close of $1,962 a tonne on Monday.
Zinc, used in galvanising, climbed to $1,858.50 from a close of $1,838, while tin rose to $18,750 from $18,695.
Battery material lead rose to $1,950 from $1,937, while stainless-steel ingredient nickel climbed to $18,570 from $18,380.
The $1.5 billion Ramu nickel project, China's single-largest mining investment in Papua New Guinea, should be operating close to maximum capacity by mid to late-2013, Australian minority partner Highlands Pacific said on Tuesday. - Reuters