LONDON: Copper rose on Monday in a rebound from a low last week, helped by a weaker dollar, but concerns remained about the outlook for demand after data showed growth in China's manufacturing sector had contracted.
The dollar fell versus the euro after data showed euro zone manufacturing activity stabilised, but was expected to recover quickly on prospects that the US Federal Reserve will wind down its monetary stimulus programme.
A weaker dollar makes dollar-priced metal cheaper for European and other non-US investors.
Benchmark copper on the London Metal Exchange ended up 3.39 percent at $6,979 a tonne, its highest level since June 19.
Copper fell by 7.6 percent in June, its biggest monthly drop since May 2012, on worries about growth prospects in China and expectations of a roll-back of stimulus measures from the US Federal Reserve. It hit a near three-year low of $6,602 last week.
"We are on the verge of a short-covering rally. The potential is for (a move up to) $7,200 or even $7,400," T-Commodity consultant Gianclaudio Torlizzi said.
"Fundamental-wise, the outlook is murky as the credit boom era is over, but the condition is not as bad as the market thinks. Credit tensions could ease in July, so the price should discount this."
Worries over the tapering of US monetary stimulus were reinforced earlier by data showing US manufacturing rose in June from a contraction the precious month, while construction spending hit its highest in nearly four years in May.
For China, however, figures indicated tepid second-quarter growth in the world's top metals consumer. China's official purchasing managers' index (PMI) slipped to 50.1 in June from 50.8 in May. A private sector report also showed factory activity reached its lowest in nine months.
China accounts for some 40 percent of global refined demand.
"I expect copper demand to weaken over the next several months," said Chunlan Li, a Beijing-based analyst with consultancy CRU.
However, copper was helped by China's short-term lending rate falling on Monday to its lowest level since a cash crunch last month, while stocks showed signs of stabilisation as traders shifted the focus back to the economy.
The latest report by the Commodity Futures Trading Commission (CFTC) showed hedge funds and money managers had boosted short positions in Comex copper by 3,581 contracts to 32,599, the most since early April.
The London Metal Exchange said it had launched a three-month consultation on proposed changes to metals warehousing rules, aimed at reducing long queues that end-users face in getting material.
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