Copper hits one-month high

Copper touched a one-month high on Friday after weaker-than-expected US data pulled down the dollar and supported expectations of a possible rate cut from the US Federal Reserve. Copper for three months delivery on the London Metal Exchange rallied to $7,622 a tonne, its highest since August 9, but later in the session trimmed gains and closed at $7,550, $10 firmer than Thursday.
"Dollar weakness, equities trimming losses; a combination of all that has been very supportive for the whole complex," an LME trader said. Retail sales rose a smaller-than-expected 0.3 percent last month. However when motor vehicles and parts were stripped out, August retail sales fell 0.4 percent, the sharpest drop since September 2006.
The dollar fell versus the euro and yen after data showed US August retail sales rose at a slower-than-expected pace, supporting the view the Federal Reserve may need to cut rates aggressively at a meeting next week. Shares in the world's largest integrated miner BHP Billiton erased some of its earlier losses and ended the day down 0.4 percent while second largest miner Rio Tinto fell half a percent.
Many analysts expect that Fed rates, currently at 5.25 percent, will be cut next week in a bid to soothe rattled markets in the midst of a credit crisis. "The Fed has some room to cut interest rates if it deems necessary to ease pressures in the financial system. So the Fed can consider a full range of options," economist John Kemp at Sempra Metals said in a research note.
Further fallout from the credit problems emerged in the UK as the Bank of England offered an emergency loan to Northern Rock, whose shares fell 24 percent on the FTSE 100 index. The mortgage lender became the biggest British casualty so far of the credit squeeze.
"People are already nervous about the impact on economic growth and demand for metals and Northern Rock certainly didn't help," an LME floor trader said, expecting more casualties. Investment banker Barclays Capital said base metals had been the sector worst affected by global growth concerns, though should those concerns ease, strong fundamentals meant there was significant upside price potential, especially in copper, lead and zinc.
Falling copper stocks underpinned prices, down 1,325 tonnes to 135,750 in LME warehouses. Stocks in warehouses monitored by the Shanghai Futures Exchange fell 3,824 tonnes to 59,765 tonnes this week, down from just under 100,000 tonnes mid-year.
LME aluminium fell $30 at $2,430. Aluminium stocks in warehouses rose to 901,200 tonnes, up some 70,000 tonnes or 8 percent since the end of August. Lead rose $40 to $3,210, after rising 3 percent on Thursday. Nickel was up $700 at $28,600, zinc was $15 lower at $2,840 and tin was last quoted at $14,875/14,900 versus Thursday's $14,975/15,000.