Shanghai copper futures rose 1.7 percent on Monday as London copper built on a recovery in the previous session, but fears of a growing global credit squeeze meant sentiment was fragile. Prices could come under renewed pressure as investors evaluate the impact of the turmoil in financial markets on the outlook for economic growth and demand for industrial metals.
"This squeeze has a number of effects on commodities and commodity equities. Not only are product prices under pressure, but the money that has been used to buy these companies is drying up and also some may face pressure from the rising cost of debt," ANZ analyst Andrew Harrington said.
"The previously one-way story about commodities and commodity equities no longer applies and people will have to be a little more discerning in their picks," he added.
On Friday, US stocks turned positive after losses following a second cash injection by the Federal Reserve, but European shares ended almost 3 percent lower, with mining equities BHP Billion and Rio Tinto among the top 10 losers in London, down over 6 percent.
Shares in BHP listed in Australia were up more than 1 percent on Monday, while Rio declined nearly 1 percent. Shanghai's most active October contract closed up 1,110 yuan at 65,510 yuan ($8,642) a tonne on Monday.
London Metal Exchange copper for delivery in three months was up $55 at $7,505. The higher-than-expected Chinese inflation data raised market speculation that China's central bank would raise interest rates again to cool the economy.
"But the possible move will have a limited influence on metals prices in China, as investors have fully prepared for it," said analyst Yang Jun at China Futures.
China's annual consumer price inflation surged to 5.6 percent in July, the highest rate for more than a decade, the National Bureau of Statistics said on Monday, compared with a forecast of 4.9 percent in a Reuters poll.
Spot copper prices in Shanghai were up 725 yuan to between 64,600 yuan and 64,850 yuan. In a weekly report, Acquire said that leading OECD economic indicators suggested a pick-up in steel and base metals demand towards the end of 2007.
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