SINGAPORE: London copper inched up on Friday after Spain took steps to buttress its economy, but it was on course for its second weekly loss in a row as the impact of central bank easing fizzled and concerns over Chinese demand weighed ahead of week-long holiday.
China's markets will be shut from Oct 1-5, draining liquidity from the top metals consumer during a week of top tier economic releases which may show further deterioration in global growth, dimming the outlook for metals demand.
"The demand side here is not improving. If there are more increases in prices it's going to be very risky, and probably a good time to sell shorts," said Shanghai-based analyst Judy Zhu of Standard Chartered.
China's final September figures for the private sector HSBC manufacturing report will be released on Saturday, followed by National Bureau of Statistics (NBS) report on Monday Oct. 1. From the United States, durable goods, construction spending and employment data are due over the next week.
"If the PMI is not bad, I will be surprised. What I see on the ground is that people are still suffering, so September should be worse than August which could be a downside risk for copper prices tonight," Zhu added.
China is the world's top consumer of metals, accounting for 40 percent of refined copper demand last year.
Three-month copper on the London Metal Exchange had risen 0.61 percent to $8,225.25 a tonne by 0328 GMT, extending gains from the previous session, after prices hit their lowest in two weeks at $8,082 a tonne on Wednesday.
The most-traded January copper contract on the Shanghai Futures Exchange gained 0.54 percent to 59,390 yuan ($9,400) a tonne.
The ShFE temporarily raised trading margins for all its futures contracts from Sept. 28 in a bid to control price volatility ahead of the mid-Autumn and Chinese National Day holidays.
Some fresh appetite for risk came on Friday as Spain announced a crisis budget for 2013 based mostly on spending cuts in what many see as an effort to pre-empt the likely conditions of an international bailout.
This helped perk up the euro against other currencies, easing pressure on metals. A weaker dollar makes commodities, priced in the US currency, cheaper for holders of other currencies.
But signs of slowing global growth persisted in Asia, where South Korea's industrial output contracted for the third consecutive month, while Japan's industrial output fell more than expected in August.
Also from the United States, orders for long-lasting US manufactured goods fell sharply in August, suggesting the main engine of the economic recovery was stalling even as a report showing a drop in new claims for jobless aid offered a hopeful sign on the labor market.
"It's looking more and more like stimulus will be the catalyst needed for a year-end rally in commodities but that would appear to be a shaky foundation upon which to build a bullish view," said RBC Capital in a note.
"(It's) likely any year end strength will be used as a selling opportunity by both the trade and macro community look(ing) for a dip next year as there still few signs that any kind of global recovery is underway."
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