NEW YORK/LONDON: Copper rose nearly 2 percent for its first gain in six days on Friday as a weaker dollar and signs of easing political tension in Italy restored some market confidence, recently shaken by Europe's debt crisis.
A pick-up in Chinese bank lending during October and upbeat data from the United States added to the red metal's upside burst, easing some fears about contracting growth and curbed demand from the world's top two consumers.
Still, worries about the impact of the European crisis on the global economy stayed at the forefront of investors' minds, limiting their bullish stance on industrial metals in the short term as headlines from the region kept volatility high.
Copper moved higher with a rallying euro versus the safe-haven dollar after Italy's Senate approved a new budget law, clearing the way for final approval of the package in the lower house on Saturday and the formation of an emergency government to replace Prime Minister Silvio Berlusconi.
London Metal Exchange (LME) benchmark copper closed at $7,639 a tonne, up about 2 percent from a last bid at $7,475 on Thursday.
But for the week, the metal lost nearly 3 percent as investors reduced risk and fled for the safety of the dollar and gold. Open interest in copper futures continued to fall in the first few weeks of November.
In New York, the key December COMEX contract climbed 8.95 cents or 2.65 percent to settle at $3.4635 per lb, near the upper end of its $3.3430 to $3.4675 session range.
Futures volumes stood near 51,000 lots in late New York trade, down more than 16 percent from the 30-day norm, according to preliminary Thomson Reuters data.
Looking ahead, copper will continue to take its cues from broader macro developments, even as its underlying fundamentals remain some of the more robust of the base metals group.
Copper production at the Grasberg mine in Indonesia has ground to a halt due to a strike, forcing its owner and operator, Freeport-McMoRan, to declare partial force majeure.
Meanwhile, a six-week-old wage dispute at Peru's Cerro Verde mine showed some tentative signs of resolution.
Still, it will likely remain a challenging year for copper as investors worry about demand uncertainty from a slowing economy.
"There is some question on the demand side for copper ... that's the psychology of the market right now," said Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey.
"Funds have covered a lot of their shorts from the recent rally we have had, so the market does not have that to fall back on if things start to run. It will depend on new buying from the funds."
Money managers, including hedge funds and other large speculators, trimmed their bearish copper bets for a third straight week, latest data from the US Commodity Futures Trading Commission showed.
"We're going to have to see a general feeling that not only are we not going to have a double dip, but we are going to see some real growth. That may be hard to come by until sometime next year," O'Neill added.
CHINESE RESTOCKING
LME data showed copper stocks fell by 2,325 tonnes, with outflows out of Singapore and South Korea, indicating some restocking among Chinese consumers.
"The evidence shows that Chinese buying is continuing to improve, and we can expect that to sustain through to the rest of the year," said Gayle Berry, an analyst at Barclays Capital.
"It looks like China is managing to engineer a soft landing, but if we begin to see some of the data disappoint, then that will be the real risk to base metals prices because the market isn't pricing that in."
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