Copper moves up

Copper rose on Tuesday, touching a four-month high, as the dollar fell but trading is likely to remain cautious ahead of a German ruling on the euro zone's bailout fund and a Fed meeting which could reveal more stimulus measures. Three-month copper on the London Metal Exchange closed at $8,090 a tonne, up from a close of $8,068, but off a session high of $8,127.75, its highest level since May 10.
Germany's Constitutional Court said it would go ahead with Wednesday's ruling on the legality of the European Stability Mechanism and the fiscal compact for budget discipline, whose implementation has been delayed for months by the German judges. Experts believe the court will approve the new permanent bailout fund and the budget deal, while possibly imposing tough conditions limiting Berlin's flexibility on future rescues.
The market was also focused on a US Federal Reserve meeting which ends on Thursday. Poor job figures for August raised the chances the central bank will take out extra insurance against an economic relapse by plumping for fresh monetary stimulus. "Ahead of the conclusion of the two-day Fed meeting we are likely to see rather quiet trading but prices will probably make significant gains if the Fed announces QE3," said Daniel Briesemann, analyst at Commerzbank. Copper broke above the $8,000 mark for the first time since mid-May on Monday. It has erased year-to-date losses of 5 percent seen in June to post gains of more than 5 percent, most of which were added in September.
"This upward trend could continue. After the change of leadership in China we could see some renewed strong growth in the Chinese economy and we expect higher prices not only for copper but for base metals in general," Briesemann added. China, the world's top metals consumer, is preparing for a once-a-decade leadership change later this year. Keeping prices supported on Tuesday was a rise in the euro to a near four-month high against the dollar, on speculation the German court will back the euro zone's bailout fund and that further easing is likely to come from the US Fed.
A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies. "From our side, we expect prices to stabilise. If any easing announcements are more pronounced than expected you can easily have prices trend higher. The dollar has come under pressure, so part of this move is dollar related," said Dominic Schnider, head of commodity research at UBS Wealth Management.
Also supporting commodities was a series of spending and subsidy announcements by China, which accounted for 40 percent of refined copper demand last year. "It's probably a bit early to call for an acceleration (in housing market growth) but at least the drag on the housing side is likely to disappear. We have seen from the provinces and the government some stimulus measures, so that should help," added Schnider.
Fixed asset investment, which accounted for half of China's net economic growth in the first-half of 2012, grew 20.2 percent between January and August compared to the same period a year earlier, even as China's factories ran at their slowest rate for 39 months, data on Sunday showed.
Officials last week also said they had given the green light to 60 infrastructure projects worth more than $150 billion, as Beijing seeks to energise the economy. The announcement fuelled investor hopes the world's growth engine may get a lift in the fourth quarter of the year and beyond.
"Base metal prices are likely to continue to be driven largely by fluctuating sentiment about the probability of further monetary easing and other stimulus measures," Stephen Briggs, senior metals strategist at BNP Paribas, said. "Our house view is that the Fed will soon announce more quantitative easing and that China will take further measures too."
Aluminium closed at $2,079 a tonne at the close from Monday's close of $2,060, while tin, untraded at the close, was last bid at $20,675 from $20,600. Nickel closed at $16,825 from $16,775. Zinc, used to galvanise steel, closed at $2,017 from $2,015 and lead closed at $2,128 from $2,120.