LONDON: Copper rose on Monday, boosted by news that policymakers in France and Germany have agreed on reforms to tackle the growing debt crisis in Europe, while tough new austerity measures unveiled by Italy also helped ease fears about the region's debt troubles.
Three-month copper on the London Metal Exchange rose to $7,986.25 a tonne by 1537 GMT, up 1.2 percent from a close of $7,895 on Friday.
Speaking after a meeting with German Chancellor Angela Merkel, French President Nicolas Sarkozy said the two leaders have agreed on a series of reforms to address the euro zone sovereign debt crisis that will be presented to EU President Herman Van Rompuy on Wednesday.
The news also helped the euro rise against the dollar, further cementing gains for base metals.
A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
"We are reaching a point now (in the euro zone debt crisis) where it's all or nothing and a critical decision has to be made or it could be the beginning of something quite nasty," Gayle Berry, an analyst at Barcap, said.
"Given that the European debt crisis has been the single biggest weight on metals prices, if we do get something that the market receive favourably then I think you could see an improvement in prices particularly on the back of short covering."
Sentiment was also boosted by news Italy had unveiled a 30-billion-euro package of austerity steps, while Ireland also detailed 2.2 billion euros worth of spending cuts.
Copper's gains come after the metal used in power and construction rose by around 9 percent last week on a surprise move by major global central banks to inject cheaper liquidity into the banking sector. Year to date it is trading 17 percent lower.
In a note to clients, analysts at Macquarie said open interest and prices over the last week indicate new long positions have been built in aluminium and copper, while lead and zinc have seen short covering.
"It is interesting to see data suggesting new longs in aluminium and copper and the key question is whether the price rally of the last week is sustainable at this stage," Macquarie analysts said.
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