LONDON: Copper prices crept back above $8,000 on Monday after better-than-expected US retail sales boosted appetite for risky assets, although worries about Chinese demand and fears about the euro zone economy kept gains in check.
Three-month copper on the London Metal Exchange traded at $8,025 a tonne at 1335 GMT, up 0.4 percent from a close of $7,990 on Friday and recovered from a three-month low of $7,885.25 earlier in the session.
Helping support short-term sentiment, data showed US retail sales rose more than expected in March as Americans shrugged off high gasoline prices and bought a range of goods, suggesting that economic growth in the first quarter did not slow as much as many had feared.
"Stronger retail sales suggests the recovery momentum is continuing, and that has helped provide short-term support to market-sensitive base metals prices," said Andrey Kryuchenkov, an analyst at VTB Capital.
"Now we have further evidence that the US economy is doing OK, but people are more concerned about troubles in the euro zone and China."
Fears about the growing debt crisis in the euro zone kept investors on edge. Rising concerns on Spain's budget deficit sent safe-haven German bond prices to record highs and Spanish 10-year bond yields above 6 percent for the first time this year on Monday.
On currency markets, the euro fell broadly - hitting a two-month low against the dollar and yen - as the rising cost of Spanish borrowing fanned worries about the wider euro zone, and hence demand for industrial commodities.
Fears about the outlook for demand from top consumer China kept further gains in check for the metal used in power and construction, which slid 2.8 percent on Friday after Chinese data showed the economy growing at its slowest clip in nearly three years.
"We have the China slowdown fears and now the flare-out in Spanish yields, and that has put pressure on the euro, so that's a dampener on sentiment," Societe Generale analyst Robin Bhar said.
EURO ZONE FEARS
In February copper was up nearly 15 percent for the year when it hit a high of $8,765 as investors bet on firm Chinese demand and tight global supplies. That year-to-date gain thinned to less than 4 percent on Monday.
Spain's banks increased their reliance on cheap loans from the European Central Bank in March, borrowing almost double what they did in February.
Uncertainty over the euro zone and wider global economy and the issue of Chinese demand are expected to keep copper prices soft this year, although analysts are slightly more optimistic than they were in January, a Reuters poll showed on Friday.
The average forecast of 37 analysts in the survey, carried out in recent weeks, called for cash prices for the metal used in power and construction to average $8,445 a tonne in 2012, rising to $8,818 in 2013.
Commerzbank analysts pointed to a thinning in long positions as an indicator that the market's correction had further to run.
"As the CFTC statistics published on Friday reveal, speculative financial investors have withdrawn almost completely from copper," the bank said.
"Given that the price slide continued even after the reporting date, it is likely that net long positions have since been reduced yet further. In the current market, this correction could initially continue."
In other metals, tin was at $21,800 from Friday's close of $22,205, while nickel was at $18,119 from $18,305 on Friday.
Aluminium was flat at $2,080, while zinc rose to $2,005.50 from $1,984, and lead was at $2,072 from Friday's close of $2,065.
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