Copper rose to a one-month high on Thursday, boosted by the euro's strength against the dollar after a Spanish bond auction drew strong demand, easing some immediate concerns about peripheral euro zone debt.
Benchmark copper on the London Metal Exchange rose to $7,905 a tonne by 12:27 SA time, up 1.5 percent from a close of $7,785 on
Wednesday.
The metal used in power and having earlier hit its highest level since December 8 at $7,916.50. Aluminium and zinc also hit one-month highs, while tin rose to a 1-1/2 month high.
Spain's Treasury raised 10 billion euros from the auction of three bonds in the primary market, doubling a target of up to 5 billion euros, in an auction seen as a test for sentiment towards peripheral euro zone debt.
The strong demand helped the euro strengthen further against the dollar, giving a boost to metals prices as a weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
“Previously there was a very bearish economic view being priced in so even an small improvement in that is having a very positive effect on prices especially given the market was generally positioned on the short side,” said Gayle Berry, analyst at Barclays Capital.
“But we're not out of the woods yet. Over the next couple of months, the markets are going to remain very sensitive to the big picture and I don't think this is the beginning of a straight line higher.”
Market focus now turns to the outcome of the European Central Bank (ECB) policy meeting, a day after the head of sovereign ratings for Fitch warned the ECB should ramp up its buying of troubled euro zone debt to support Italy and prevent a “cataclysmic” collapse of the euro.
Last year, copper posted its first annual decline since 2008, losing a quarter of its value as the euro zone debt crisis and growth
uncertainty soured the demand outlook for industrial metals.
Volume at the London Metal Exchange, the target of potential takeover bids, jumped 22 percent last year to a new record of 146.6
million lots, the exchange said on Thursday.
CHINESE INFLATION FALLS
China's annual inflation fell to 4.1 percent in December, the lowest level in 15 months. If easier monetary policy seeps into end-user markets, it may help support prices for copper as buyers will have more liquidity.
Traders said an easing in Chinese inflation may help spur some domestic buying after the Lunar New Year break, as the government is now expected to focus less on putting a brake on prices and more on stimulus measures.
Looking at inventories, data showed copper stocks in LME-registered warehouses fell by 6,000 tonnes, with 4,775 tonnes delivered out of warehouses in Busan, South Korea. Total cancelled warrants for copper stood at 13.74 percent.
“Inventory levels at the London Metal Exchange are falling and suggest robust consumption,” Credit Suisse said in a note.
“Moreover, cancelled warrants, i.e. inventories already earmarked for delivery are rising as well, which suggests that further outflows
might be ahead. We take this as a positive sign.”
Three-month aluminium rose to $2,189 from Wednesday's close of $2,165 a tonne, having earlier hit a one-month high at $2,197 a tonne.
Most of China's large aluminium smelters have no plans to cut production like the world's top global producers of the metal, with firm domestic prices encouraging steady output in the first quarter of 2012, smelter sources and analysts said.
Zinc was at $1,945 from $1,936, earlier rising to a one-month high at $1,952, while tin rose to a 1-1/2 month high at $20,948 from $20,475.
Lead was at $2,016.25 from $1,990, while nickel rose to $19,570 from $19,450. - Reuters