Copper rose on Friday after European leaders agreed to tighter eurozone budget rules at a summit aiming to combat a two-year debt crisis that has crimped industrial demand. Markets were initially disappointed by a lack of progress on immediate measures to ease pressure on government bond markets, though they later took comfort from news that the European Central Bank had stepped in to buy Italy's bonds.
They also rallied after an unnamed source told Reuters that China's central bank will create a new investment vehicle worth $300 billion, part of which will be focused on investments in Europe. The news lifted the euro, as the dollar fell against a basket of currencies. A weaker dollar makes metals priced in the currency less expensive for holders of other currencies. "EU leaders are at the point where they can't afford to not do something quite major, but over the next couple of months there could be renewed concerns that things are not moving fast enough," said Caroline Bain, analyst at the Economist Intelligence Unit.
Three-month copper on the London Metal Exchange, untraded at the close, was bid at $7,760.25 a tonne, off a session high of $7,852.50. It closed at $7,710 on Thursday, when it fell sharply after the ECB upheld its reluctance to step up bond purchases. Copper has fallen for five weeks out of six, and could stretch losses until the end of the year if any developments flowing from Friday's summit are deemed negative for the eurozone's economic prospects.
Also capping copper's gains, data out earlier showed industrial output in China, the world's top copper consumer, hit its slowest pace in more than two years in November and inflation tumbled as economic conditions deteriorated. The data raised expectations that Beijing will ease monetary policy again, having shaved the reserve requirement for commercial lenders on December 5, the first cut in three years. "I'm worried that China's slowing down too fast, that's the scare factor," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
China, which consumes around 40 percent of the world's copper, has been seen as the remaining pillar for the industrial metal, with the eurozone engulfed by a debt crisis and the US economy struggling. Data out earlier showed copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 26.1 percent from last Friday, indicating demand may have contracted over the past week.
Copper has fallen 25 percent from this year's record high of $10,190 reached in February, and is down 20 percent this year, heading for its first annual loss since 2008 when a financial crisis tripped the global economy. Soldering metal tin closed at $20,250 a tonne from $20,200 on Thursday.
Industry cracks are starting to show in top tin producer Indonesia, with the breach and collapse of the self-imposed export stoppage this month resulting in the surprise resignation of the secretary at the Indonesia Tin Association (ITA). Zinc, used in galvanising, closed at $2,003 a tonne from $1,988, battery material lead at $2,165 from $2,103, aluminium closed flat at $2,065, and stainless-steel ingredient nickel was $18,600 from $20,200.
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