SINGAPORE: London copper edged up on Thursday, after plumbing an almost two-week low in the previous session, but gains may be short-lived as Europe's shrinking economy and a drop in US factory output underline a dimming outlook for demand.
Three-month copper on the London Metal Exchange edged up 0.13 percent to $7,207.25 a tonne by 0706 GMT, reversing an earlier drop of around half a percent and off Wednesday's low of $7,101.
The most-traded September copper contract on the Shanghai Futures Exchange closed down 0.50 percent at 52,150 yuan ($8,500) a tonne, after earlier touching its lowest since May 3 at 51,660 yuan.
"The trend has been down for copper. I still feel we've got further downside to come because of the trend of weak global macro data coming through," said Tim Radford, global analyst at Sydney-based advisor Rivkin.
US factory output dropped in April and manufacturing activity in New York state contracted this month, while the euro zone contracted for a sixth straight quarter and France slid into recession, data showed.
Radford also said that record equity market gains were driving corporate confidence in the United States, pushing up the dollar and also drawing investment away from commodities.
This was reflected in reports this week that showed global investment banks suffered another bruising decline in commodity trading in the first three months of this year.
Copper's gains on Thursday reflected a rise in China's sharemarket, said a Singapore-based trader.
"A very sudden bounce in Shanghai equities caused a sharp rally in both ShFE copper and rebar. Copper continues to grind higher as the move has spooked day traders into short covering," the trader said.
Chinese shares appeared headed for their best daily gain in two weeks on Thursday, lifting the Hong Kong market, as investors chased a rally in property, brokerage and technology-related counters.
London copper was supported as the dollar took a breather from its recent run higher. A softer dollar makes commodities priced in the greenback cheaper for holders of other currencies.
But analysts say the dollar's current bullish streak is likely to continue over the long run. The dollar is up 0.9 percent against a basket of currencies on the week, after rising over 1 percent last week.
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