US copper futures trimmed gains and barely closed in positive territory on Monday as a relief rally from Friday's surprise discount rate cut by the US Federal Reserve seemed to lose steam, analysts said.
"It (The rate cut) was enough to give the market a one-day jolt, but I think it's kind of reassessing that today and looking at the bigger picture again," said Michael Gross, futures analyst with Liberty Trading Group in Florida.
Most-active December copper settled up 1.55 cents to $3.1630 a lb. on the New York Mercantile Exchange's Comex division, just off the bottom of its session range between $3.1575 and $3.2285. Traders said the price weakness heading into the close could possibly set the stage for lower prices heading into tomorrow's session.
"I don't think this thing is going to be making a V-bottom," said one dealer down on the floor of the exchange, referring to technical term that shows a sharp reversal, which forms a V pattern at the bottom of a trend.
"I would expect probably some consolidation, but I wouldn't go as far as to say there is a low in right now." Copper for September delivery rose 1.30 cents by the close to $3.1595 a lb., while the rest of the board ended with gains ranging from 1.60 to 2.60 cents.
Final estimated futures volumes reached 14,510 lots, compared with Friday's final count of 24,710 lots. As of August 17, open interest in Comex copper futures rose 310 lots to 75,965 contracts. On Friday, the Federal Reserve cut its primary discount rate it charges to commercial banks by half a percentage point to 5.75 percent in a surprise move aimed at stabilising the recently battered credit market.
However, the fears were rekindled after Thornburg Mortgage's chief operating Officer Larry Gladstone said there was a crisis in investor confidence in the mortgage sector.
"The (base metals) complex will remain a hostage to how asset and credit markets behave this week; as a result, we remain cautious recommending any fresh long position taking in the current environment as the implications for growth appear negative," investment bank UBS said in a note to clients.
On the supply-side, London Metal Exchange (LME) copper warehouse inventories increased by 475 tonnes to 121,025 tonnes on Monday, while Comex copper stocks were unchanged at 21,244 short tons on Friday.
The market continued to keep an eye on labour developments in Latin America, where Peruvian workers at Southern Copper's Cuajone mine rejected a pay offer last week, following rejections by workers at the company's Ilo smelter and Toquepala mine.
In Mexico, miners at the Cananea copper pit continued their work stoppage over safety conditions and accused mine owner Group Mexico of not investing in maintenance despite sky-high copper prices.
Group Mexico said on Friday it would begin safety and pay talks with the union on Monday aimed at ending the conflict. In trade data released after the close on Friday, the non-commercial net short position rose to 5,938 lots for the week ended August 14, compared with 5,554 lots the previous week.
Open interest declined to 76,111 contracts from 84,651 lots a week. London Metal Exchange copper for delivery in three months settled unchanged from Friday's close of $7,020 a tonne.
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