Copper rose to its highest in more than a month on Thursday as the dollar fell and the euro rose on signs the bloc's debt crisis had started to ease and on optimism US lawmakers will agree a deal to avert higher taxes and spending cuts. The US economy also grew faster than initially thought in the third quarter, helping to lift investor sentiment. A benchmark world stock index hit a three-week high.
Three-month copper on the London Metal Exchange hit $7,943 a tonne, the highest since October 23. It was untraded at the close, but bid at $7,899.5 from a last bid of $7,765 on Wednesday. Aluminium and zinc each touched seven-week highs. Copper, which fell half a percent on Wednesday, has gained about 5 percent since touching a two-month low of $7,506 on November 9 after worries about weak demand and potential for the US fiscal cliff to send the world's largest economy back into recession. Analyst Duncan Hobbs at Macquarie in London said a year-end rally was possible if positive headlines on the global economy and top metal consumer China keep emerging.
"If we continue to see positive macro-economic data and the US politicians avoid the fiscal cliff, that would be supportive and there might be enough momentum to carry the price into the early $8,000s, that's perfectly plausible," he said. Investors took heart after US House of Representatives Speaker John Boehner voiced optimism that Republicans could broker a deal with the White House and a conservative congressman said he would back an agreement with President Barack Obama to raise rates on the rich. The market could also get a fillip on Monday after China's official purchasing manager's index is published over the weekend, which is expected to show factory activity in November expanded at its fastest pace in seven months.
"Underlining that, (copper) stocks are pretty light generally speaking and access is not always easy even when stocks exist. You could argue that is also constructive for early next year," Hobbs added. LME copper stocks are down by a third this year. Still, there was concern by some analysts that underlying physical demand for metals was still sluggish as the world economy fights to gain momentum.
Senior metal executives in China said consumption of copper cathode is likely to grow more slowly there next year, cooling further after the pace of growth looks set to drop by at least a third this year. "We cannot get too excited about copper though as it really continues to trade within a well worn range seen throughout this year," RBC said in a research note.
On the LME, the premium of the December aluminium contract over January crept up to a high of $16, up from only $4.50 a week ago, as a major long and short holders continued to face off. LME data shows one party controls 20-29 percent of December aluminium contracts, while two short holders have positions each making up 5-9 percent and 10-19 percent of the market.
Triland Metals said in a note that large warehouse stock movements and warrant cancellations were expected as the parties manoeuvre ahead of December's contract expiry on the third Wednesday of the month. Three-month aluminium closed at $2,063 per tonne, breaking above the 200-day moving average and touching the highest level in seven weeks. It closed at $2,000 on Wednesday. Norwegian aluminium group Norsk Hydro said the market outside China could grow 2-4 percent next year after this year's 2 percent rise.
Zinc closed at $2,027 per tonne, after hitting the highest in around seven weeks, from $1,987 at the close. Lead ended at $2,222 from $2,188, edging above resistance at the 100-day moving average of $2,232. Nickel closed at $17,000 a tonne from $16,980 and tin at $21,870 from $21,425.
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