Copper edged up on Monday amid an uptick in risk appetite in Europe's equity markets, though gains were firmly capped by new evidence of shrinking factory activity in China and renewed worries over public debt problems in Spain.
China's economy offered more evidence of a seventh straight quarter of slowing growth on Monday, with an official survey of factory managers remaining in contractionary territory for a second successive month.
This followed a private sector China PMI survey published on Saturday which pointed to a month in which a slide in the rate of economic growth was halted but not reversed in September.
In the eurozone, meanwhile, manufacturing put in its worst performance in the three months to September since the 2008 financial crisis, a business survey showed on Monday - pointing to a new recession.
Giving copper some respite, however, the euro edged up versus the dollar after hitting a three-week low earlier, while European shares rose as investors increased their exposure to cyclical sectors such as banks and miners.
Benchmark three-month copper on the London Metal Exchange edged up 0.30 percent to $8,230 a tonne by 11:12 SA time, adding to a small advance seen the previous session.
In Shanghai, the futures exchange is closed this week for a national holiday.
Copper ended the third quarter up 7 percent thanks to a raft of easing measures from the US Federal Reserve and the European Central Bank, as well as targeted fine-tuning by China.
Beijing approved about $150 billion worth of infrastructure projects last month and has kept money markets liquid, but has refrained from cutting interest rates or the amount of reserves banks must hold since July.
“This week is going to be one of most likely diminished liquidity. After the run up we had into the end of the third quarter the path of least resistance is sideways to lower,” said Credit Suisse analyst Tom Kendall.
He added that Beijing was unlikely to cut rates until the Communist Party congress later this year. China is the world's top copper consumer, so policy moves in that country are critical for the metal's demand prospects.
EUROPE UNCERTAINTY
In Europe, uncertainty about when Spain would seek a bailout still weighed.
While an audit of Spain's banks failed to throw up any surprises on Friday, investors are awaiting the outcome of Moody's rating agency's latest review of Spain's sovereign rating.
Europe's fourth-largest economy may be downgraded to junk status, piling pressure on it to seek an international bailout soon.
In industry news, expectations of lower demand from China have led Codelco, the world's No.1 copper producer, to seek to reduce 2013 physical copper premiums to Asian buyers by about $5, while its European rate will likely be held or trimmed by a smaller amount, a source linked to the company told Reuters.
A slew of central bank policy meetings is due this week, as is US non-farm payrolls data, potentially deterring investors from making big bets.
“On Friday, US non-farm payrolls are due. This time, the release will be watched even more closely than usual as the Fed has made its quantitative easing program dependent on labor market developments. The data can thus provide guidance on how much easing one can expect,” Credit Suisse said in a note.
In other metals traded, soldering metal tin fell 0.48 percent to $21,700 a tonne, zinc used in galvanizing fell 1.34 percent to $2,068, battery material lead dipped 0.04 percent to $2,279, aluminium dropped 1.26 percent to $2,251, while stainless-steel ingredient nickel
edged up 0.14 percent to $18,501.
LME data showed that as of two days ago, one entity held between 50-80 percent of all nickel warrants, cash and “tomorrow” positions, pointing to a potential squeeze on investors caught short of material. - Reuters