Copper down

Copper failed to extend gains into a third day Friday, ending lower, as further tightening moves in China, Middle East unrest and Japan's nuclear crisis kept investor risk at a minimum. Still, prices of the metal managed to post their best weekly performance since the first week of February, snapping back from initial panic-led liquidation pressures stemming from last Friday's devastating earthquake in Japan.
London Metal Exchange (LME) three-month copper shed $55 to close at $9,510 a tonne, still down about 7 percent from its record at $10,190 in February. COMEX copper for May delivery eased 0.50 cent to settle at $4.3390 per lb in lighter-than-usual volume. According to Thomson Reuters preliminary data, COMEX volume traded stood just above 30,100 lots, over 40 percent below the 30-day norm.
Aside from the uncertain near-term fundamental outlook, analysts noted a problematic technical picture developing. For the second straight session momentum has slowed beneath the 20-day ($4.35/lb) and 50-day ($4.40/lb) moving averages, a development that could set prices back again if money managers grow impatient, an analyst said. "We are developing a nice little ridge of resistance right around the $4.34-$4.35," said Sterling Smith, an analyst for Country Hedging Inc in St. Paul, Minnesota.
"A loss of momentum here could probably set us back. Any inability to get this market closing above $4.40 on a regular basis, money managers are going to find that troubling." Copper prices initially came off after China's central bank raised lenders' required reserves for the sixth time in an ongoing cycle of monetary tightening to fight inflation. But the market digested the widely expected move, expecting the impact of Chinese tightening measures to be moderate in the longer term.
"China is taking some moderate measures to cool down the economy. This may have a negative impact in the near term, but we don't think it will derail China's growth in terms of base metals," Credit Suisse analyst Stefan Graber said. "China's metals demand will continue to grow robustly this year." News that Libya declared a cease-fire in the country to comply with a United Nations resolution passed overnight gave a further boost to the market's confidence.
"The cease-fire in Libya provided some sort of support to the market and certainly there has been a lift," said Daniel Major, an analyst at RBS. "In the near term less military action is always taken as positive." Earlier, the Group of Seven agreed on joint intervention to curb the soaring yen and calm markets over Japan's nuclear power plant crisis.
LME copper stocks added another 850 tonnes overnight, boosting inventories to their highest level since last July, at 429,650 tonnes. Copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 12.1 percent from last Friday.
Aluminium ended up $37 at $2,560 a tonne. LME stockpiles saw an outflow of 6,575 tonnes, leaving levels at 4,612,825 tonnes. They hit a record-high at 4,640,750 tonnes in January 2010. Despite the seemingly hefty load of supply, physical markets in the United States and in Europe remained extremely tight.