Copper steadies

Copper was steady on Thursday as most investors were unwilling to take positions ahead of Sunday's Greek election, critical to the euro zone crisis which has shaken markets and hit metals demand in the last year. Fears of a deeper than previously expected economic slowdown in top consumer China were also balanced by expectations that the Chinese government will react to contraction with stimulus to revive growth.
Benchmark copper on the London Metal Exchange (LME) closed at $7,420 from a close of $7,390 on Wednesday. "There's a bit of a hiatus (ahead of) the Greek election and potential policy measures that could be taken by the Fed or by others. (Even) going short, you take a chance if the market moves against you," said Capital Economics analyst Ross Strachan. Greece goes to the polls on Sunday in a vote that could determine the nation's future in the euro zone.
Adding to concerns about the troubled euro zone, credit ratings agency Moody's Investors Service cut its rating on Spanish government debt on Wednesday by three notches to Baa3 from A3, saying the newly approved euro zone plan to help Spain's banks will increase the country's debt burden. Italy sold 4.5 billion euros of government bonds, including 3 billion euros of three-year bonds, meeting decent demand despite the deepening euro zone debt crisis. Many however believe that Italy would be the next in line for a bailout should Spain have to ask for one.
Weighing on metals, the benchmark 10-year Spanish government bond yields rose to hit 7 percent, a level deemed too expensive for a sovereign to continue borrowing cash over the long term. The rise in Spanish debt yields came as Germany, Europe's most powerful economy, rebuffed calls from other European leaders to help underwrite the region's debt or guarantee deposits in euro zone banks.
"The German Chancellor is playing a dangerous game in our view, forcing the markets into a corner without offering them a way out," said INTL FCStone analyst Ed Meier. "In fact, we think that many of the proposals she is now rejecting will ultimately have to be put back into the mix if the Euro is to survive. It should be an interesting few weeks ahead, with metals trading on anything but fundamentals." Also hurting metals, US new claims for state jobless benefits rose for the fifth time in six weeks and consumer prices fell in May.
China's May copper imports unexpectedly climbed 11.7 percent data showed this week, an indication, according to some, that demand could be stronger in the near term following the recent price slump. "There was strong import data from China of late but the enthusiasm in the market went very quickly," Commerzbank analyst Daniel Briesemann said.
Markets took a bearish turn on Wednesday after data showed US retail sales fell for a second straight month in May and wholesale prices dropped by the most in three years. This added to a raft of other indicators, including employment and manufacturing, that have highlighted a slowdown in the country's economic recovery. "With the slide in retail sales data yesterday it is becoming more likely the economic slump will continue throughout the summer," RBC Capital said in a note.
In other metals tin closed at $19,625 a tonne from $19,450 while zinc, used to galvanise steel, was $1,892 from a last bid of $1,882 on Wednesday. Battery material lead ended at $1,920 from $1,899 and aluminium at $1,956 from $1,964. Nickel closed at $16,635 from $16,980.