LONDON: Copper fell from a three week high on Monday, erasing earlier gains, as investors shunned risk after Germany's Finance Minister said the upcoming European Union summit would not definitively solve the region's debt crisis.
Three-month copper on the London Metal Exchange(LME) traded at $7,492.50 a tonne at 1408 GMT versus Friday's close at $7,545 a tonne.
It had earlier hit its highest in three weeks at $7,660 a tonne, a rebound of more than 15 percent from a 2011 trough of $6,635 hit earlier this month.
G20 finance ministers and central bankers said at a meeting in Paris at the weekend that they expected euro zone leaders to "decisively address the current challenges through a comprehensive plan" at a European Union summit on Oct. 23.
But European shares were off earlier session highs after German Finance Minister Wolfgang Schaeuble played down hopes of a definitive solution to the euro zone debt crisis at the coming EU summit.
"Copper did very well earlier today due to hopes that some solution would be made evident soon. That bullishness has turned sour on later remarks that it wouldn't be that simple," VM Group analyst Carl Firman said.
"You are going to see a lot of volatility in the markets across all asset classes over the next few weeks until something is put on the table that will convince markets that the crisis in the EU will be dealt with."
The euro also fell against the dollar. A stronger dollar makes commodities like metals more expensive for holders of other currencies.
In the United States, a gauge of manufacturing in New York State contracted for the fifth month in a row in October as new orders were flat and the outlook for the coming months weakened, the New York Federal Reserve said in a report.
US industrial production rose 0.2 percent in September, in line with expectations, as a gain in manufacturing offset a drop in utility output, a Federal Reserve report showed.
SUPPLY KINKS
Freeport McMoRan Copper & Gold Inc halted copper and gold production on Monday at its giant Grasberg mine in Indonesia because of security fears and worker blockades, in the worst supply disruption since a strike began a month ago.
Also, on Friday, a Peruvian union pulled out of talks with the US miner, while members threatened to go on a hunger strike to press demands for a pay hike.
The roughly 20 million tonne copper market is expected to be in a 670,000-tonne deficit this year, according to a poll of 24 analysts compiled by Reuters in July.
Global miner Rio Tinto signalled a major retreat from its aluminium business on Monday, only four years after buying aluminium giant Alcan for $38 billion.
Aluminium traded at $2,225 from a last bid of $2,220 on Friday. Three-month tin was at $21,499 from $21,800.
"Fundamentally the price should probably be stronger," said Macquarie in a note. "Although demand growth has slowed and supply has been rising, the market remains in a deficit that, relative to market size, is the largest among the LME traded base metals and belies the recent sharp sell-off in the tin price."
Zinc , used in galvanizing, traded at $1,906.50 from $1,930 on Friday's close. Battery material lead was at $2,003 from $2,026. A lack of immediately available supply -- despite LME stocks at record levels -- continued to be reflected in prices for so-called tomorrow-next day delivery, which traded at a $5 backwardation or premium earlier.
Nickel traded at $18,750 from $18,875.
Investors will also keep an eye out this week for industrial production data out of China on Tuesday.
"Analysts are expecting Chinese gross domestic product increased 9.3 pct year over year, giving evidence that the market may not be as pessimistic on Chinese growth as had been expected," said RBC Capital in a note.
"The actual report is due out tomorrow, so expect day-end position squaring by short-term accounts before the close."
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