LME copper dips on shaky economic outlook

SINGAPORE: London copper futures slipped 0.3 percent on Tuesday as a tentative outlook for the global economy prompted investors to cash in on early gains, although hopes of Chinese buying kept losses in check.

An open arbitrage to sell metal to top consumer China boosted hopes buyers there will snap up the metal after prices dropped 10 percent in the first two weeks of the month.

"Risk appetite has staged a partial recovery. But with the recent volatility we've seen, those who get nervous easily sell on rallies," said Citigroup analyst David Thurtell.

"It's a very, very uncertain time."

Three-month copper on the London Metal Exchange eased to $8,886.75 a tonne by 0337 GMT, after rising as high as $8,953.75 earlier.

Copper, down more than 7 percent this year, fell to eight-month lows last week in a commodity-wide rout fed by fears of another US recession and a widening debt crisis in Europe.

But with three-month LME copper still trading at a 330 yuan discount to the November copper contract on the Shanghai Futures Exchange, including China's 17 percent value-added tax, there remains an incentive for Chinese to import.

Technical charts show LME copper faces resistance at $9,003, only a break of which will trigger a sharp rise to $9,348, said Reuters market analyst Wang Tao.

The most-active November copper contract on the Shanghai Futures Exchange fell 0.8 percent to 66,730 yuan per tonne.

Investors are eyeing a slew of US data due later on Tuesday, including housing starts and industrial output, for more clues about the state of the world's biggest economy after a recent spate of disappointing indicators.

Data overnight showed manufacturing in the New York area contracted for the third straight month in August, tempering any lingering hopes for a rebound in the second half.

Also on the radar is a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel on how to make the euro zone work more effectively amid persistent doubts over Europe's ability to solve its sovereign debt crisis.

Copyright Reuters, 2011