Tuesday, 26 August 2014 17:45
LONDON: Copper prices rose to three-week highs on Tuesday, as hopes of stimulus measures by the European Central Bank gathered pace following signs of a weakening European economy.
The euro zone's flatlining economy took another hit when data on Monday showed German business sentiment sagging for the fourth month running, while a row over the lack of growth led the French government to resign.
In stronger language than he has used in the past, European Central Bank President Mario Draghi said on Friday that the European Central Bank (ECB) was prepared to respond with all its "available" tools should inflation drop further.
"Any bad news (about the European economy) is a good news because it increases the odds and cements the view of a further stimulus package from the ECB," said Naeem Aslam, chief market strategist at Ava Trade.
Three-month copper on the London Metal Exchange reached its highest since Aug. 5 at $7,108.75 a tonne in intraday trade before giving up the gains to trade at $7,060 a tonne, at 0948 GMT, down 0.2 percent.
Prices notched up their biggest weekly gain last week in 11 months. The market was closed on Monday.
"What we want to see is this rhetoric (from Draghi) followed up with concrete action, and that would provide the confidence to conclude that the technical base we feel is in place for copper is of substance," said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.
In the United States, the economy continued to gather steam. Sales of new U.S. single-family homes fell for a second straight month in July, but a surge in the stock of properties on the market and slower price gains should help stimulate demand in the months ahead.
Looking ahead, U.S. durable goods figures are due at 1230 GMT.
"The data will show how strong the demand is among its consumers and this will determine the further path for the metal," Aslam said.
In industry news, aluminium producer Alcoa Inc said on Monday it would permanently close its Portovesme smelter on the Italian island of Sardinia.
The closure of the plant, which has not operated since November 2012, will reduce Alcoa's global smelting capacity by 150,000 tonnes to 3.6 million tonnes per year.
Chilean copper miner Antofagasta posted an 11.5 percent fall in first-half core profit on Tuesday, hit by higher production costs and lower copper prices.Copyright Reuters, 2014