Copper steadies

Copper was steady on Friday, with a brightening economic outlook for big metal consumer China offsetting concerns about the euro zone's deteriorating economy and a potential fiscal crisis in the United States. Growth in China's manufacturing sector picked up in December, a preliminary private survey showed, with rises in areas such as new orders and employment underlining an improving outlook.
The HSBC flash purchasing managers' index for December rose to 50.9, a 14-month high and the fifth straight monthly gain. A figure above 50 indicates that growth is accelerating, while one below 50 shows slowing growth. "That's clearly heading in the right direction. On top of it you've got a big jump in Chinese equity markets. That's significant as well," said Natixis analyst Nic Brown.
"China accounts for 40 percent of the metals market. Even if you have a situation in which Europe and the US are struggling, if you get stronger growth in China you're going to get stronger growth in Asia." Three-month copper on the London Metal Exchange closed at $8,065, a tonne, slightly down from the previous session's close of $8,074. The metal hit a two-month high on Wednesday, and is up more than 6 percent this year.
China shares significantly outperformed Asian peers on Friday, after the improved manufacturing data, which was adding support to metals, traders said. Prospects are growing that China's new leadership will set in motion the policies Beijing has outlined to boost infrastructure development, which would increase demand for industrial metals.
The country last month approved construction of two city subway projects worth 49 billion yuan ($7.87 billion), adding to a list of railway project approvals aimed at boosting growth in the world's second biggest economy. "To my mind lots of the policies that have been talked about over the last three to six months will now start to get implemented," Brown said.
"We could find a lot of stimulus coming through as we go into 2013. I certainly expect that the growth outlook in China will get better." Boding well for base metals demand, US industrial output rose more than expected in November, posting its sharpest increase in nearly two years, as production bounced back from disruption by superstorm Sandy.
November US consumer prices in the meantime fell for the first time in six months, pushing the euro up against the dollar and pointing to muted inflation pressures that should allow the Federal Reserve to stay on its ultra-easy monetary policy path. "Some support came from a weaker dollar after weak inflation data for November and the US industrial data also helped copper," VTB Capital analyst Andrey Kryuchenkov said. A weaker US currency makes dollar-priced commodities such as metals cheaper for holders of euros.
In the euro zone, however, the growth outlook is a lot dimmer. Europeans' reluctance to spend on travel and eating out slowed increases in the cost of living in the region last month, and the economy's deteriorating power to generate jobs offered little chance for consumers to help in economic recovery.
Disappointing German manufacturing sector figures overshadowed a small pick-up in the wider euro zone purchasing manager index - data from polling of around 5,000 businesses across the 17-nation bloc that is viewed as a reliable growth indicator. In other metals, tin closed at $23,150 a tonne from $22,975 at the close on Thursday, while zinc ended at $2,090 from $2,073. Lead finished $2,296 from $2,303 and aluminium, untraded in rings, was last bid at $2,122 from $2,126. Nickel closed at $17,875 from $17,700.