Copper surged to a one-month peak on Thursday for a third day, buoyed by a strong euro and fresh hopes that US, Chinese and European officials will unleash more stimulus measures to revive their economies, which would in turn boost demand for metals. Three-month copper on the London Metal Exchange ended up 1.05 percent at $7,684.50 a tonne, off an intraday peak of $7,720, which was the highest since July 20.
The euro hit a seven-week high versus the dollar, driven by talk that Spain was negotiating with the eurozone over conditions for international aid, and by speculation the European Central Bank was considering targeting yield levels with its bond purchases.
"It's difficult to be really bullish given the macro-economic background, but all that news is in the price and there's every likelihood of a fresh stimulus package in the US, plus we're coming into the seasonally strong period for metals demand," Sucden trader Steve Hardcastle said. Copper, which is down 12 percent from a peak of $8,765 in February, has broken out of a range of $7,300 to $7,600, which trapped it for several weeks. It must challenge $7,800 to spark further momentum, analyst Wiktor Bielski at VTB Capital said.
Capping gains in copper slightly, a US official said on Thursday the minutes of the Fed meeting were "a bit stale" and that data since then had been somewhat stronger. The minutes said: "Many (Fed) members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery."
In China, data showed factory activity in August shrank at the fastest pace in nine months as new export orders slumped and inventories rose, a signal that a persistent slowdown in economic growth has extended deeper into the third quarter. "China's flash manufacturing PMI has dropped to its lowest level this year. So far today the impact on commodity prices has been trumped by hopes of further quantitative easing from the US Fed. However, we doubt that additional global policy stimulus will be sufficient to prevent prices from falling as final demand remains weak and inventories high," said Ross Strachan, an analyst at Capital Economics. Cash tin on the LME was evaluated at a $9 premium to three-month prices on Wednesday, compared with a premium of $1.50 on Tuesday.
"With spec players still short, recent production closures and a large warrant holder ... we think tin could still run higher in the short term. The next big resistance point in the charts for tin is the 100-day moving average at $19,786," RBC Capital said in a note.
LME data on Thursday showed one party held 40 to 50 percent of tin warrants, down from 50 to 80 percent in data released on Wednesday. Three-month tin hit the highest levels in nearly 2-1/2 months at $20,069 a tonne. It closed at $19,950 a tonne, up 2.3 percent from Wednesday's close.
In other metals, aluminium ended up 1.57 percent at $1,904.50 a tonne, while zinc closed up 1.47 percent at $1,862. Lead ended at $1,952 up 1.77 percent, after touching the highest levels in over three weeks at $1,953.75, and nickel closed up 2.5 percent at $16,475.
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