SHANGHAI: London copper hit a four-month high on Wednesday, underpinned by a firmer tone in some Asian markets as they reopened after a break, while news of a potential boost to US infrastructure spending pointed to further gains.
Three-month copper on the London Metal Exchange rose 0.68 percent to $8,420.25 a tonne by 0458 GMT, extending its advance from the previous session. It earlier hit its highest since September 19 at $8,455.25 a tonne, and has climbed around 11 percent so far this year.
In his State of the Union addres, President Barack Obama proposed plowing half the money America will save from the end of its wars in Iraq and Afghanistan into high-speed rail lines and repairs to the nation's creaking roads and infrastructure.
"It creates jobs, it creates growth, it boosts the economy. It's a smart move and one ultimately that will be good for the commodities market, because all the focus has been on emerging market demand," said Mark Pervan, head of commodities research at ANZ Research in Melbourne.
"It creates a sweet spot for the western market story."
The developed world market share for copper usage has slipped to 20 percent from about 40 percent ten years ago, Pervan said.
"That could potentially base out, or pick up again, if we start to see infrastructure activity increase. I wouldn't be surprised if the savvy medium- to longer term investors are seeing this as a valid entry point."
Still, LME volumes were low on Wednesday, with fewer than 900 lots of copper having changed hands in electronic trade with top consumer China away.
The Shanghai Futures Exchange is closed this week for the Lunar New Year holiday. Chinese financial markets will reopen on Monday, Jan. 30.
Better-than-expected economic data from Europe was also helping to underpin metals prices, Credit Suisse Private Banking said in a note.
A surprise upturn in the service sector this month suggested the euro zone may escape recession but the overall economy is still struggling to gain any traction outside Germany and to a lesser extent France, surveys showed on Tuesday.
"This is positive for industrial metals demand...(but) being a highly cyclical sector, industrial metals are vulnerable to a further deterioration of funding conditions," it said.
BUTTRESSING
In wider markets the dollar rose to a four-week high of 77.89 yen on the EBS trading platform in Asia on Wednesday, but remained on balance weaker against the euro, lending support to metals.
A softer dollar makes metals cheaper for holders of other currencies.
Also shoring up the complex, Asian shares rose on Wednesday, underpinned by strong earnings from US technology giant Apple , stabilising European money markets and falling euro zone debt yields, with investors shifting their focus to the Federal Reserve from Europe.
The US Federal Reserve's two-day policy meeting, the first of 2012, ends later on Wednesday. The central bank will start a new practice of announcing policymakers' interest-rate projections.
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