Copper rebounded on Friday from a two-week low hit the previous session, helped by a weaker dollar and falling inventories, but ended lower on the week as worries over demand growth in top consumer China and elsewhere lingered. Three-month copper on the London Metal Exchange closed at $8,380 a tonne, from a close of $8,290 on Thursday. It fell 1.5 percent this week.
Copper clung to gains on Friday after data showed that while US home sales fell last month, prices jumped to their highest level in eight months, offering a mixed picture of the housing market. Copper is used extensively in construction. On Thursday, the metal hit a two-week low of $8,262.50 a tonne and closed down 2 percent, knocked by slower-than-expected manufacturing data from China and the EU's largest economies.
"It's a bit of a rebound after yesterday heavy selling pressure," said Credit Suisse analyst Stefan Graber. "Copper selling was maybe overdone yesterday, after manufacturing data triggered concerns about slowing demand." China's manufacturing sector activity shrank in March for a fifth successive month and the euro zone's economy took an unexpected turn for the worse in March, hit by a sharp fall in French and German factory activity, business surveys showed on Thursday. "We believe the price slumps to be exaggerated in purely fundamental terms, as the example of copper shows. Besides serious problems on the supply side, demand remains very robust," Commerzbank said in a note.
"Copper stocks in the warehouses of the LME have been declining steadily ... That said, any new negative news or disappointing economic data could spark a change in sentiment among market players and cause the current downward trend to continue in the short term." Supporting copper, the dollar fell to three-week lows versus the euro and the Swiss franc as traders cited stop-loss sell orders being triggered on the dollar's break of technical support against a basket of currencies.
A weaker dollar can lift dollar-denominated commodities by making them cheaper for consumers using other currencies. Rising inventories of copper held in warehouses monitored by the Shanghai Futures Exchange had raised concerns about weak demand in the last few months in China, which consumes about 40 percent of global copper output. Data released on Friday, however, shows these stocks eased 1.6 percent from last Friday to 223,632 tonnes.
"After a bit of concern about trade deficit in China, falling inventories in China are definitely a positive. It could be the very first, tentative sign of improved activity and better order situation in China," Graber said. Inventories of copper in warehouses monitored by the LME continued to fall, and hit their lowest since November 2008, at 255,175 tonnes.
Also supporting signals that a pick-up might be under way, data this week showed China's inflows of refined copper rose 12 percent month on month in February to hit the third-highest level ever, on delayed shipments from the holiday month of January. Tin closed at $22,225 a tonne from $22,110, and zinc ended at $2,005 from $1,985 at Thursday's close. Lead closed at $1,995 from $1,985 and aluminium at $2,174 from $2,167. Nickel closed at $18,175 from $18,450.
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