Copper moves higher

Copper rose on Monday, boosted by news that policymakers in France and Germany have agreed on reforms to tackle the growing debt crisis in Europe, while tough new austerity measures unveiled by Italy also helped ease fears about the region's debt troubles.
Three-month copper on the London Metal Exchange ended at $7,940 a tonne, up 0.6 percent from Friday's close of $7,895. Speaking after a meeting with German Chancellor Angela Merkel, French President Nicolas Sarkozy said the two leaders have agreed on a series of reforms to address the eurozone sovereign debt crisis that will be presented to EU President Herman Van Rompuy on Wednesday. EU leaders meet on Thursday and Friday to discuss how to tackle the eurozone debt crisis and bring about closer fiscal ties among the 17 countries in the single currency bloc.
The news also helped the euro rise against the dollar, further cementing gains for base metals. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies. "We are reaching a point now (in the eurozone debt crisis) where it's all or nothing and a critical decision has to be made or it could be the beginning of something quite nasty," Gayle Berry, an analyst at Barcap, said.
"Given that the European debt crisis has been the single biggest weight on metals prices, if we do get something that the market receive favourably then I think you could see an improvement in prices particularly on the back of short covering." Sentiment was also boosted by news Italy had unveiled a 30-billion-euro package of austerity steps, while Ireland also detailed 2.2 billion euros worth of spending cuts.
Copper's gains come after the metal used in power and construction rose by around 9 percent last week on a surprise move by major global central banks to inject cheaper liquidity into the banking sector. Year to date it is trading 17 percent lower. In a note to clients, analysts at Macquarie said open interest and prices over the last week indicate new long positions have been built in aluminium and copper, while lead and zinc have seen short covering.
"It is interesting to see data suggesting new longs in aluminium and copper and the key question is whether the price rally of the last week is sustainable at this stage," Macquarie analysts said. Data out earlier showed the service sector in top metals consumer China shrank in November, mirroring similar weakness seen last week in data on the country's key manufacturing sector.
The numbers were a mixed bag for market sentiment, however, as they reinforced expectations that Beijing could ease monetary policy further, which could be positive for metals prices going forward. Also, copper has been moving out of mostly Asian-based LME warehouses since October, while stocks in Asian bonded warehouses fell 11.6 percent last week. This signals good Asian demand that could only be aided by easier monetary policy.
In the United States, the pace of growth in the vast US services sector slowed in November to the slowest since January 2010, according to the Institute for Supply Management. The Eurozone Composite Purchasing Managers Index (PMI), out earlier, showed the escalating sovereign debt crisis has already pushed the eurozone economy into a contraction that could be far worse than economists had expected.
"The dark cloud of the European debt crisis continues to hang over the market. China too is looking a bit wobbly as concerns about growth and economic stability hamper the mood there," RBC analysts said in a note. Aluminium closed at $2,125 a tonne from $2,130 on Friday. Tin ended at $19,900 from $19,950, while zinc, used in galvanising was at $2,040 a tonne from $2,052. Battery material lead closed at $2,120 from a last bid of $2,105, while stainless-steel ingredient nickel rose to $18,505 from $17,740.