Copper steadied on Monday as investors took the view a euro zone credit rating cut by ratings agency Standard & Poor's late last week was largely priced in and turned their attention to key growth data from top metals buyer China.
Benchmark three-month copper rose 0.64 percent to $8,051 a tonne by 12:05 SA time, from a last bid of $8,000 on the London Metal Exchange kerb close on Friday. The metal posted its strongest weekly performance in six last weeks.
“The market realised nothing drastic happened as far as metals are concerned, they're very macro sensitive yes but China matters much more this year for copper,” said VTB Capital analyst Andre Kryuchenkov.
“People are getting tired of the euro zone we know things are not rosy but we still haven't seen a serious credit event.”
Standard & Poor's downgraded nine of the euro zone's 17 countries on Friday, with France and Austria losing their top-notch status, and said it would decide shortly whether to cut the euro zone's bailout fund from triple-A.
Adding to jitters, talks have stalled over a Greek bailout, putting Athens under strong pressure to complete a deal with private creditors to cut debt to more sustainable levels or risk default in March.
Copper lost nearly 21 percent of its value last year largely on fears that Europe's debt crisis could engulf the world economy and damage metals demand.
It has gained around 6 percent so far this year, however, helped by strong Chinese import data, successful debt auctions by Italy and Spain and ongoing falls in LME copper inventories.
Markets are now awaiting key data from China, which consumes around 40 percent of the world's copper, for further clues on the outlook for demand.
“Chinese GDP, industrial production and fixed asset investment data will be published this Tuesday. A moderation of growth is widely expected, but a negative surprise could weigh on sentiment in industrial metals,” Credit Suisse said in a note.
China's businesses will be shut during the week of Jan. 22 for the Lunar New Year celebrations, with Chinese consumers showing a lack of interest before the start of the week-long holidays.
US markets are closed on Monday for the Martin Luther King holiday.
TIGHTER SUPPLY
Front-month copper in Shanghai fell into a discount against the most actively traded third month contract last week, signalling demand is fading heading into the Lunar New Year.
But on Monday the discount narrowed, suggesting markets may be beginning to price in tighter copper supply after the break.
“After Chinese New Year I expect to see prices picking up again, because demand is still there and quite robust,” said Daniel Briesemann, an analyst at Commerzbank.
Speculators in copper remained bearish, however, as demand prospects continued to be clouded by Europe's debt crisis and signs of slowing growth in China, US Commodity Futures Trading Commission (CFTC) figures showed on Friday.
Goldman Sachs trimmed its 12-month price forecasts for copper and zinc on Monday due to higher supply than expected and has become bearish on nickel, seeing a decline of about 5 percent over the next three to 12 months.
For most base metals, the investment bank still expects higher prices in the medium term.
Stainless-steel ingredient nickel fell 1.1 percent to $19,385 a tonne from $19,600, joining zinc, used in galvanising, which fell 0.26 percent to $1,955 a tonne from $1,960.
Other metals were up with copper.
Soldering metal tin rose 0.24 percent to $21,100 a tonne from $21,050, lead rose 0.57 percent to $2,022.50 from $2,011 while packaging metals aluminium rose 0.28 percent to $2,150.25 from $2,145. - Reuters