Copper advanced by half a percent in thin trade on Thursday underpinned by a stronger euro, although the positive effects of a successful European Central Bank funding operation in the previous session were fading fast.
The ECB, in its first-ever three year tender, on Wednesday lent 523 banks a record 489 billion euros ($638 billion), well above the 310 billion euro take-up forecast, and raising hopes that funding strains in the region will abate.
Three month copper on the London Metal Exchange traded at $7,501 at 1017 GMT from a last bid of $7,450 on Wednesday.
The metal used in power and construction is on track to close down by 25 percent this year, having shed almost five percent so far this month, weighed down by prospects for slowing global growth and uncertainty over the outlook for next year.
“As much as the market was quite positive yesterday about the ECB first long term auction being oversubscribed, and the hope that the money can filter through to the commercial banks, recapitalising Europe, this euphoria dissipated very quickly,” said analyst Andrey Kryuchenkov of VTB Capital.
“This morning it is purely low volumes on the back of a weaker dollar and equities are higher....since the start of the week, total open interest has started coming off, so we're seeing a bit of short covering - I don't think it's going to be a sustained year end rally like we saw last year,” he added.
Financial stocks led European share markets higher on Thursday, while the euro rose. A stronger euro makes dollar-priced commodities cheaper for holders of other currencies.
The number of outstanding copper futures contracts on the LME has fallen this week, as positions are closed out ahead of year end.
“In recent days the base metals have been edging higher and we think that is due to short-covering as traders square up their books ahead of the holidays,” said FastMarkets in a note. “However, the firmer prices are if anything just leading to consolidation and as such we would say suggest a pause in the overall down trends.”
VLISSINGEN CANCELLATIONS
A queue for metal is building in the Dutch port of Vlissingen, with a second day of large cancellations of aluminium warrants, the latest LME data showed.
Of 907,700 tonnes of aluminium stored in LME sheds, 500,000 tonnes have been cancelled and are to be drawn out of warehouses.
With a minimum LME daily load out rate of 1,500 tonnes per day, rising to 3,000 tonnes when the LME introduces new rules from April, any business wishing to take out metal may have to wait until late July for delivery.
Traders also noted very high volumes of aluminium in the February-March contract in recent days as the backwardation, or premium for February over March, disappeared this week.
LME aluminium was at $1,995 from a last bid of $1,994 on Wednesday's close.
Tin was at $19,120 from $19,200 while zinc, used in galvanising was at $1,867.75 from $1,851. Battery material lead was at $1,976
from $1,967 and nickel was at $18,805 from $18,975. - Reuters