Copper slipped on Tuesday as the euro fell against the dollar after weaker-than-expected economic data from the United States raised concerns about the state of the global economy and the demand outlook for industrial metals. The figures showed that business activity in the US Midwest grew more slowly than expected and US consumer confidence unexpectedly fell in January, raising doubts about an economic recovery in the world's second-largest economy.
Copper was still on track for a 10 percent increase in January, its biggest gain in three months, lifted by hopes Greece would reach an agreement with its creditors to avoid a messy default. Benchmark copper on the London Metal Exchange (LME) closed at $8,320 a tonne, down 1.3 percent from a close of $8,429 on Monday. "The Chicago PMI and the consumer confidence data weighed on copper and on the whole commodity sector; nevertheless this makes a third round of quantitative easing more likely in the US," said Commerzbank analyst Daniel Briesemann. "I think this weakness should be temporary as the possible monetary easing will support industrial metals."
The Federal Reserve has moved closer to embarking on a new round of its controversial money-pumping after the central bank and its chairman, Ben Bernanke, last week highlighted a grim outlook for the US economy. Capping gains, Greek Prime Minister Lucas Papademos said negotiators had made "significant progress" on talks for a debt swap deal between the government and private bond holders, with the aim of having a definitive agreement by the end of this week.
An agreement between European leaders over strict new measures on sovereign budget discipline also eased some worries over a deterioration of the euro zone debt crisis. Investors are now waiting for PMI data from China to be released early on Wednesday, which will give more clues on the state of the world's second-largest economy and biggest consumer of industrial metals.
Large stock withdrawals in LME-monitored warehouses helped support copper, with the latest data showing inventories monitored by the LME dropped by 2,300 tonnes to 330,825 tonnes, its lowest since September 2009. "It is partly reflective of domestic US consumption. Some of the economic data and the corporate results (from the US) all point to a market where consumption is actually beginning to grow again," Barclays analyst Gayle Berry said.
On the technical front, copper held above its 200-day moving average, a level which it broke late last week, in a bullish price signal for the metal. In northern Chile, workers of a union at Teck Resources Ltd's mid-sized Quebrada Blanca copper mine are poised to strike after labour contract talks with the mining company broke down, a union leader said on Monday.
Chile's copper output jumped in December from a year earlier but registered a drop of 3.2 percent in 2011 from the prior year as falling ore grades, labour woes and weather problems hammered the world's top producer, the government said on Monday. Aluminium closed at $2,239 a tonne, from a close of $2,279 a tonne on Monday. Zinc, used in galvanising, finished at $2,106 from a close of $2,124. Tin was at $24,345 from $23,975.
Battery material lead closed at $2,213 from $2,265 and stainless steel ingredient nickel at $20,855 from $21,305. "Our feeling is that the nickel price now looks to have neared a peak as Chinese import demand eases and the risks of a correction in the short run are growing, despite a non-Chinese demand recovery," Macquarie analysts said in a note.