SINGAPORE: London copper futures slipped on Friday after a more than one percent rise in the previous session, although an improved US economic outlook kept prices supported near the top of this week's trading range.
Optimism stemming from data showing new jobless claims in the world's largest economy fell to a four-year low last week and a pick up in manufacturing activity in the Northeast this month drove the S&P 500 to its highest since the 2008 financial crisis, and pushed copper up on Thursday.
"The sentiment in London remains strong, while Shanghai is less so as domestic investors are concerned about the weak performance in the stock market and the high copper stocks that will take a while to digest," said Zhou Jie, an analyst at China CIFCO Futures.
Copper stocks monitored by the Shanghai Futures Exchange hit a decade high last week, while LME stocks fell every day since Feb. 22 to 267,750 tonnes by March 14, the lowest since June 2009.
The prompt-to-three-month spread on LME copper closed at backwardation of $17.75 a tonne on Thursday, a level unseen since end of February, suggesting tightness in the physical market.
This echoes the high ratio of canceled warrants against total stocks, which has been above 30 percent since the end of February and shows a large portion of the stockpiles were being tagged for delivery.
Three-month copper on the London Metal Exchange edged down 0.3 percent to $8,542 a tonne by 0327 GMT, after zigzagging in a range of $8,400 to $8,600 this week. Copper was headed for a weekly gain of 0.4 percent.
The most-traded June copper contract on the Shanghai Futures Exchange gained half a percent to 60,730 yuan ($9,600) a tonne, chasing Thursday's gains in London.
Technical analysis suggested that signals have turned neutral for LME copper for the day, said Reuters market analyst Wang Tao.
A tighter supply outlook also supported copper prices.
Freeport McMoran Copper & Gold Inc said first-quarter copper output would be down by about 10 percent because of labour-related problems at its Grasberg mine in Indonesia the world's second biggest copper mine which will not return to full production until the second quarter.
Traders said the news was certainly supportive of copper prices, but the firm's output downfall is unlikely to cause global supply shortage any time soon.
LME copper has risen more than 12 percent so far this year, benefiting from brightened global economic outlook and increased liquidity across markets as central banks around the world ease credit curbs to spur growth.
Copper's price gain comes despite a shaky outlook for demand from top consumer China. Premier Wen Jiabao said on Wednesday China must embrace slower growth and bolder political reform to keep its economy from faltering, and also dampened hopes for any near-term relaxation of curbs in the property sector.
"Consumption in March is better than January and February, but the pace of recovery is not even close to the same period in past years," said a Shanghai-based trader. "April will see further improvement, but the question is how significant it will be."
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