Copper hits two-week high

Copper hit a two-week high on Thursday, bolstered by expectations that China could announce further monetary easing measures in the second half and by strong corporate earnings which led global equity markets higher, boosting investor sentiment. Equities, seen by some as a proxy for global growth, were higher in the US and Europe, offsetting some recent gloomy economic data and boosting copper.
China's Premier Wen Jiabao said the government needed to step up efforts to create more jobs given that the job market could turn for the worse. The comments sparked hopes for more policy easing, with some in the market betting on announcements this weekend.
Three-months copper on the London Metal Exchange touched an intraday peak of $7,813 per tonne, its highest since July 3. It ended at $7,735, up 1.28 percent on the day, and heading for its second straight week of gains. The metal is up just 2 percent this year however, having dropped sharply in the second quarter amid concerns over Europe's debt crisis, slower growth in China and a stalling recovery in the US.
"The premier said some positive things but I'm not convinced they're going to do a huge amount until after the Chinese new year when the new premier starts," said Citi analyst David Thurtell. Also weighing on copper, US data out earlier showed existing home sales dropped 4.5 percent last month, compared with forecasts for a 1.1 percent rise.
Investors kept their hopes pinned on China, however, mindful of the premier's comments and of Wednesday's data which showed China's home prices broke eight straight months of decline to rise in June.
"The markets seem to be focusing on expectations that the Chinese authorities will now accelerate policies to rev up their economy. However, we have our doubts that renewed government 'pump-priming' is going to do the trick, especially when most of China's trading partners remain mired in recession or near recessionary levels," said INTL FCStone in a note.
Chinese traders hope infrastructure investments in the next few months will prop up demand. According to media reports, China's big four state banks doubled their pace of lending in the first half of July from a month ago in part due to a pickup in borrowing by government-led investment schemes. In physical markets in China however, traders said copper sales were much lower compared with a year ago.
"In the copper downstream markets, there is a slight pick-up in state grid construction, but these are still too weak now to boost overall demand," said an analyst with a trading firm. LME lead, which has shed 6 percent so far this year, ended up 1.02 percent at $1,929.50 a tonne, while nickel dipped 0.31 percent to close at $16,050 a tonne. Analyst Andrew Keen at HSBC in London cut his 2012 forecast for nickel by 10 percent to $18,030 a tonne, but said the market may temporarily tighten later in the year.
The global nickel market was in supply surplus by 27,000 tonnes in the first five months of 2012, the latest monthly bulletin from Lisbon-based International Nickel Study Group showed. Aluminium ended up 1.83 percent at $1,944 a tonne, zinc increased 0.96 percent to close at $1,887 and tin climbed 1.57 percent to end at $19,095 a tonne.