Bargain hunters lift copper, eyes on dollar

Tag : lead,copper
China - * Bargain hunters lift base metals, copper up 1 percent
* Prices consolidate after last week's weakness
* Dollar's fall across the board, oil's rise support
* Rise in tin cancelled warrants buoys price
(Updates prices)
By Humeyra Pamuk
LONDON, Sept 4 (Reuters) - Copper climbed more than 1 percent toits highest level in almost a week on Thursday, as bargain hunterslifted the metal in erratic trade that is taking its cue fromcurrency markets.
A sharp rise in cancelled warrants -- material earmarked fordelivery -- boosted tin prices, while zinc and lead gained around 3percent, bouncing back from recent lows.
Copper for three-months delivery on the London Metal Exchange roseas high as $7,440 per tonne and was at $7,375 per tonne in openoutcry trade versus Wednesday's $7,345.
"What you're seeing this morning is a bounce from recent weakness,"said analyst Sudakshina Unnikrishnan at Barclays (nyse: BCS - news - people ) Capital. "Prices are just finding their feet."
Earlier in the week copper fell to $7,128 per tonne, nearing itssix-month low and bringing the total losses to 7 percent since thebeginning of last week.
"This is a reaction to the aggressive selling recently. People gota little bit of short and now they are covering their positions,"an LME trader said.
Several traders said the dollar falling and oil firming above $110a barrel also helped. The U.S. currency slipped across the board astraders locked in profits from its dramatic gains in past weeks,while investors awaited interest rate decisions by the Bank ofEngland and the European Central Bank.
The LME trader said copper's gains would be capped as worries aboutglobal economic growth and Chinese demand, key for metal prices,still haunt investors.
"I think the sentiment still remains pretty vulnerable," saidUnnikrishnan at Barclays. "The concerns still remain on board abouthow the global economy is developing. Concerns about the slowdownand how that links back to demand are pretty much in place."
The recent rises in copper inventories are a sign of still sluggishdemand. Currently stocks of copper, mainly used in construction,stand around 182,000 tonnes - its highest since January.
"There are still grey clouds over the United States and Europe,"Gerard Burg, an analyst at the National Australia Bank (nyse: NAB - news - people ), said.
"The trend for metals is down. The global economy is looking softerthan in some years and supply is moving into surplus for some ofthese metals," Burg said.
Aluminium gained $9.5 to $2,685 per tonne. Several analysts citestructural power problems in China as likely to lead to a tighteraluminium market. However stocks are around 1.17 million tonnes --the highest since April 2004.
In industry news, Vedanta Resources Ltd expects aluminium output torise to about 500,000 tonnes in the year to March 2009, up 28percent from about 390,000 tonnes in the previous year, a seniorcompany official told Reuters.
Unnikrishnan at Barclays said the rise of cancelled warrants in tin-- currently accounting for around 17 percent of total stocks at5,820 tonnes, supported the price.
Lead gained $35 to $1,985 per tonne while zinc was at $1,838 versusWednesday's last quote of $1,787.5/1,788 and nickel was at $19,605from $19,550/19,600.
(Editing by Michael Urquhart) Copyright 2008 Reuters, Click for Restriction