Copper dipped on Tuesday, but held close to its highest in nearly two months after better-than-expected manufacturing data in China and the United States suggested economic recovery and a pick up in demand for industrial metals in the two biggest economies.
Three-month copper on the London Metal Exchange was down 0.1 percent at $8,629 a tonne by 12:32 Sa time. It hit a session high of $8,702.75, not far off this year's peak of $8,765 reached in early February.
Volumes were light in a holiday shortened week, with China's financial markets shut until Wednesday, and many Western world markets closed on Friday and Monday for the Easter long weekend.
Copper rose more than 2 percent on Monday, its biggest single-day gain since February.
“For me the big question for the base metals market this week is how significant are those Chinese PMI figures yesterday, and the fact that we have had a whole slew of good manufacturing data suggest that there is almost certainly a pick up that is good news,” said Natixis analyst Nic Brown.
The Institute for Supply Management said on Monday its index of US factory activity rose to 53.4 from 52.4, topping economists' expectations. Factory activity also strengthened in leading Asian exporters China, South Korea and Taiwan.
Manufacturing strengthened in the United States and China in March while the euro zone contracted for the eighth straight month, underlining the uneven pace of global economic growth. China accounts for 40 percent of global copper consumption.
Reports from the euro zone, which is teetering on the brink of recession, showed the downturn in the region's smaller nations has spread to core countries Germany and France, according to purchasing managers' indexes (PMIs) for March.
“It is particularly the details of the Chinese manufacturing PMI that are spurring some optimism,” Credit Suisse said in a research note.
“What dampens the optimism a bit is that inventories at the London Metals Exchange have risen on Monday. However, we think the bigger picture currently matters more. Prices could gain a bit further in the days ahead.”
Copper stocks in LME-monitored warehouses have started rising again after a steady fall since October, partly indicating slower demand. Data on Tuesday showed they climbed 3,100 tonnes to 260,650 tonnes.
A slightly weaker dollar against a basket of currencies helped underpin metals prices. A softer dollar can lift dollar-denominated commodities by making them less expensive for consumers using other currencies.
The market awaited direction from US Federal Reserve minutes later in the day and from Wednesday's European Central Bank policy meeting.
Tin fell 0.4 percent to $23,150 from $23,250 at Monday's close while zinc was up 0.2 percent at $2,012 from $2,008. Lead was flat at
$2, 060, aluminium off 0.1 percent at $2,127 from $2,130 and nickel was down 1 percent at $18,415 from $18,225. - Reuters