Copper hits two-week high

Copper hit a two-week high on Thursday as investors bought on growing speculation of rate cuts in the United States, which could help boost economic growth and demand for industrial metals.
Stronger sentiment for base metals prices and renewed talk of consolidation in the mining sector boosted London-listed Rio Tinto, BHP Billiton, Anglo American and Xstrata which were all up more than 3 percent. Copper for delivery in three months on the London Metal Exchange ended up at $6,880 per tonne from $6,715 at the close on Wednesday. Earlier on Thursday it touched $6,950 a tonne, the highest since November 19.
"Metals were up on rate cut talk, equity markets and some short covering," said Edward Meir, analyst at MF Global. Analysts say interest rate cuts typically take more than a year to feed through to economic activity.
The Federal Reserve's No 2 official on Wednesday signalled a willingness to cut interest rates further, saying renewed financial market turmoil could slow the US economy more abruptly than earlier thought.
"The recognition of the fact that the Fed could cut rates aggressively - which would encourage economic growth going forward - is supporting prices," said metals analyst Dan Smith at Standard Chartered. Traders said third quarter gross domestic product data from the United States, showing the fastest growth in four years helped support prices in the afternoon session.
Copper, used extensively in construction and wiring, has lost around 20 percent since the start of October, on the back of gloomy demand outlook from the United States and lack of buying from China, the world's top consumer of the metal. "At the moment China is a bit softer because of tightening credit conditions over there. Despite that, the demand for metals is still reasonably good," Smith said.
Rising stocks have also weighed on metal prices. Copper inventories at LME-registered warehouses stand at around 188,000 tonnes - having doubled since July.
Zinc rose as high as $2,560 per tonne and ended at $2,510/2,520 a tonne from $2,485 on Wednesday. Traders said rising supplies next year and in 2009 meant that the outlook for prices would stay bearish.
Nickel, a key ingredient of stainless steel, lost more than 4 percent to end at $26,900 from $28,100. Despite expectation of recovery in the stainless steel market in early 2008, the higher supply outlook could cap any gains in the price analysts said.
"Nickel inventories reached their highest level since January 2000 this week," analyst Eugen Weinberg at Commerzbank. "We remain pessimistic for the coming quarters on the back of the high supply of laterites at the moment," he added. Three-months lead slipped to $3,000 from $3,035, aluminium was at $2,505 from $2,510 and tin was steady at $16,800/16,850.