Copper hit its highest in nearly two months on Wednesday as risk appetite improved following the safe passage through the Greek parliament of an austerity plan that may help save the country from bankruptcy. Three-month copper on the London Metal Exchange closed up 2.7 percent at $9, 3 20 a tonne, from $9,072.50 at the close on Tuesday, its highest since May 4, aided by technical buying.
" You can't say there's much of a fundamental link, but it's clearly helped to alleviate some of the risk-off mentality that had been depressing the (LME metals) complex," analyst Gayle Berry of Barclays Capital said. "At least temporarily it has helped to offer some reprieve to markets that have been very concerned about sovereign debt problems," she added.
"If you look at how strong copper has rallied then it does seem to suggest that if you get even a slight improvement in macro conditions or expectations then...copper is going to rise pretty quickly." Greece's government must now win approval on Thursday for legislation detailing specific implementation measures for the 28-billion-euro ($39.7 billion) austerity package but Wednesday's vote clears a major hurdle in Greece's bid to win access to international funding to avoid default. Copper's rise came amidst a revival in other global markets. World stocks rose for the third straight day while oil prices jumped.
Also aiding sentiment were signs of improvement in the US housing sector. Pending sales of previously owned US homes rose more than expected in May, a trade group said on Wednesday, but a glut of unsold properties remains a drag on the housing market. Fundamentally, there are some bright spots for Asian copper demand, with Japan's industrial output up 5.7 percent in May, and indications of drawdowns from bonded stockpiles in China, analysts said.
But equally, other signals suggest an impending summer lull has begun. China is the world's top consumer of base metals. In Shanghai, there has been significant easing in the past few days in the nearby forwards, which has surfaced in lock step with a downwards shift in SHFE copper premiums, noted Standard Bank. "Given the proximity of the slower summer period, it appears that the shift in physical premium and the forwards may be related to expectations of slower demand...it does appear to highlight the continued price sensitive nature of Chinese demand at the moment," it said.
"We maintain our view that physical activity is likely to remain subdued until late Q3." Copper stocks in LME-monitored warehouse fell 1,350 tonnes to 467,025 tonnes, data showed on Wednesday. Copper's rally fuelled gains across other LME contracts, with zinc, lead, nickel and tin all advancing almost two percent, and lead and zinc scaling peaks last seen in late April.
Tin finished at $25,845 from $ 25,375 on Tuesday, while zinc ended at $ 2, 317 from $ 2,275. Lead closed at $ 2, 6 34 from $ 2,585, having reached a peak of $2,643. Aluminium underperformed other contracts, bid at $ 2,5 32/2,534 from $ 2,520. Nickel closed at $ 2 3, 075 from $ 22,680.
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