LONDON/SINGAPORE: Copper fell on Monday as Chinese consumption remained weak, high oil prices threatened to derail a fragile global economy and as investors fretted about how Europe would fund its mountain of debt.
A weekend meeting of the Group of 20 leading economies failed to reach agreement on making more funds available to Europe and said EU leaders must commit more money to fight the debt crisis at their summit this week.
The comments piled pressure on Germany to drop its opposition to a bigger European bailout fund.
Benchmark three-month copper on the London Metal Exchange dropped 1.22 percent to $8,426.50 a tonne in official midday rings, from $8,530.50 at the close on Friday, when it posted its strongest week since mid-January.
Copper has risen more than 11 percent so far this year but has struggled to climb further as poor demand from top consumer China and a debt-strained Europe counter upbeat US economic data.
"China is probably stockpiling, and demand in China, by Chinese standards, is relatively weak at the moment, (so) it becomes harder to justify these price levels," said BNP Paribas strategist Stephen Briggs.
"Problems in Europe haven't really gone away, (and) the rest of the world is basically saying, 'Europe is rich; they should be able to sort their own problems out', so it's a reminder that it's all a bit messy."
Rising oil prices, which touched 10-month highs last week on worries over disruption to Middle East supplies, stirred the spectre of global recession, with Europe having the most to fear as its brittle economy falters.
The euro dipped but stayed close to recent highs versus the dollar - offering support to metals - ahead of a fresh injection of liquidity by the European Central Bank. A strong euro makes dollar-priced metals cheaper for European investors.
"We are seeing improving US data, but the European debt crisis is continuing and China's manufacturing PMI data is still (contracting)," said Grace Qu, an analyst at CRU in Beijing.
Highlighting weak Chinese physical demand, at the end of last week stocks in Shanghai warehouses remained near levels last seen in 2002, at more than 216,000 tonnes.
That is in contrast to LME stockpiles, where the latest data showed stocks down at 300,475 tonnes, their lowest since August 2009, of which 212,650 tonnes are available to market, equivalent to 3.8 days of global consumption.
Looking forward, China's National Bureau of Statistics is scheduled to release the official manufacturing activity number on Thursday, and if it confirms last week's poor HSBC flash data reading, copper may be prone to more selling.
Underpinning copper, however, is nearby supply tightness, which may have been behind a surge in cash copper on Friday to a premium of more than $20 versus three-month prices, its biggest in more than a year. That premium eased to $3 on Monday.
Meanwhile in the United States, more positive data on Friday, showing upward revisions of new home sales in prior months and a drop in the supply of property on the market, added weight to the budding economic recovery.
A separate report showed US consumer confidence hitting its highest point in a year this month despite a strong rise in gasoline prices.
In other metals traded, packaging metal aluminium fell 0.82 percent to $2,309 from $2,328, with most of the near record 5.1 million tonnes of LME stocks still tied up in financing deals and not available to the market.
"Aluminium, the standout performer last week, is gaining support as the metal most leveraged to rising geopolitical tension in the Middle East," said Barclays Capital in a note.
Soldering metal tin fell 1.36 percent to $23,525 a tonne from $23,850, zinc, used in galvanizing, fell 0.75 percent to $2,064.50 from $2,080, burdened by high LME stocks.
Battery material lead was last bid down 1 percent at $2,186 from $2,208, while stainless-steel ingredient nickel fell 0.99 percent to $19,975 from $20,175.