Copper eased from a five-month peak on Monday as caution over European sovereign debt re-emerged but a softer dollar, ahead of the United States monetary meeting this week, limited losses. Benchmark copper for three-month delivery on the London Metal Exchange finished at $7,715 a tonne from $7,720 at the close on Friday.
The metal, used in power and construction, hit $7,812 earlier on Monday, its highest level since April 26. "We're seeing some hesitancy, and probably some profit-taking as well," said analyst Robin Bhar of Credit Agricole. "Obviously some sovereign risk concerns have flared up again with Ireland and Portugal which has introduced some caution into the market." The euro was steady with sentiment toward the single currency still dented by concerns about Ireland's finances. Ireland's central bank said the country would need to rethink plans to cut a bloated budget deficit.
The dollar slipped earlier on Monday on speculation the Federal Reserve may suggest the need to inject more stimulus into the struggling US economy when it announces its latest policy decision on Tuesday. Analysts also say that if the US pumps more money into the economy, it will further boost fund buying, which has helped lift base metals prices in recent weeks.
The latest LME data showed that on Friday, copper stocks slipped 1,700 tonnes to 382,500 tonnes, having fallen from 6-1/2 year highs at 555,075 tonnes in mid-February. Aluminium touched $2,223, its highest level since August 6, and finished at $2,195 recently from a last bid at $2,180 on Friday.
LME stocks for the metal, used in transport and packaging, shed 5,050 tonnes to 4.38 million tonnes. A large portion of those aluminium stocks are tied up in finance deals. A recent rise in cancelled warrants - material earmarked for delivery - has also helped boost sentiment. The latest LME data showed that aluminium cancelled warrants were at 251,825 tonnes from 150,875 tonnes the day before, amounting to 5.74 percent of the total 4.39 million tonnes in LME sheds. The global aluminium market stands at 36 million tonnes.
"There is speculation, and it is just speculation, that this is further evidence of the pre-imminent launch of an ETF," David Thurtell, analyst at Citi said on aluminium. Market talk of a possible physical copper ETF was also evident. UK-based ETF Securities declined on Monday to comment on talk that it is planning to soon launch a physically backed copper exchange traded product (ETP).
"It may just be chat ahead of LME week next month or maybe just investor idle speculation following on from even stronger rumours that two investment banks (with backing from Glencore and RUSAL) are looking into a physical aluminium ETF for the end of 2010," Bernstein Research said in a note. Trading was expected to slow this week however, due to a market holiday in Japan on Monday and Chinese holidays from Wednesday to Friday. China, the world's top metals consumer, will also be shut for a week from October 1.
Among other metals, steel-making ingredient nickel closed at $23,050 from a final bid at $23,200 on Friday. Battery material lead was ultimately at $2,195 from $2,202.50, while zinc ended at $2,180 a tonne from $2,151 and tin was at $23,500 from $23,600. On Friday, tin, used in electrical solder, hit a two-year high at $23,800 a tonne.