Copper under pressure ahead of China data, Fed decision
LONDON (June 12) Copper prices fell on Monday as the market fretted about demand in China and awaited economic data from the top consumer and a meeting of the U.S. Federal Reserve on interest rates, while a lower dollar supported sentiment.
Benchmark copper CMCU3 on the London Metal Exchange was down 0.4% at $8,334 a tonne at 1024 GMT. Prices of the metal used widely in power and construction hit a one-month high of $8,451 a tonne on Friday, driven by optimism about Chinese stimulus.
Traders said many of the gains since May 24, when copper hit a six-month low, were the result of traders and funds cutting their short positions - bets on lower prices.
Alastair Munro, base metals strategist at Marex said money supply data and the interest rate at which medium term policy loans due to mature on Thursday are rolled over from China could be important.
"Base metals are going to come under pressure. I can't see how copper or aluminium can rally in this environment of elevated interest rates," Munro said.
A lower U.S. currency makes dollar-priced commodities cheaper for holders of other currencies, which could boost demand and prices. FRX/
The Fed's two-day meeting starts on Tuesday, when U.S. May inflation data is also due. The European Central Bank and the Bank of Japan are also holding meetings this week.
In addition, the market will seek direction from Chinese data on total social financing, new yuan loans, investment, industrial production, urban investment and house prices.
Some support for copper will come from falling stocks in warehouses monitored by the Shanghai Futures Exchange.
However, receding worries about copper supplies on the LME market MCUSTX-TOTAL have widened the discount for the cash contract over the three-month CMCU0-3 contract to $25 a tonne from levels near zero last week.
In other metals, aluminium CMAL3 was down 1.5% at $2,234, zinc CMZN3 fell 1.3% to $2,372, lead CMPB3 gained 1% to $2,077, tin ceded 2.3% to $25,900 and nickel CMNI3 climbed 0.8% to $21,355 a tonne.
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