London copper up on arb trades, US data

SHANGHAI: London copper drifted up on Wednesday, boosted by arbitrage trading and positive economic data from the United States, but prices are expected to be reined in by lingering worries about the euro zone debt crisis.

Three-month copper on the London Metal Exchange edged up 0.2 percent to $7,698.50 a tonne by 0357 GMT, after rising 1 percent previously.

"London copper was boosted by some arbitrage trades this morning, but trading has been quite directionless with various push and pull factors," said a Shanghai-based trader.

The US economy lent some cheer to markets after showing signs it maintained speed into the fourth quarter as retail sales increased in October and a gauge of manufacturing in New York state rose this month for the first time since May.

The most-active January copper contract on the Shanghai Futures Exchange fell 0.8 percent to 57,020 yuan ($8,984.48) per tonne, after falling 1.6 percent on Monday.

"There are fresh short positions in Shanghai copper today, with sentiment dragged down by the performance of the euro and equities. Chinese investors feel that Shanghai copper is at the right technical point for selling and are bearish about prices going forward," the trader added.

Asian shares and the euro fell on Wednesday as signs that rising borrowing costs were affecting AAA-rated France stirred fears that even core euro zone members may not escape contagion from the region's debt crisis.

The euro zone looks for some respite on Wednesday, with Italy due to unveil a technocrat-led cabinet and a new Greek coalition expected to win a confidence vote, as Europe battles to prevent its debt woes from dragging down the world economy.

But the bloc is still unsettling investors, with France coming under heavy fire on global markets on Tuesday, reflecting fears the euro zone's second biggest economy is being sucked into a spiralling debt crisis after a warning that Paris's failure to adapt should be "ringing alarm bells".

The euro zone economy grew just 0.2 percent in the third quarter as solid growth in Germany and France was dampened by countries at the sharp end of the debt crisis and economists expect a slide into recession by early next year.

Greek conservatives set themselves on a collision course with the European Commission on Tuesday, saying they would not bow to "dictates from Brussels" over a bailout designed to save their country from bankruptcy and safeguard the euro.

Union workers at Freeport Indonesia are extending their strike into a third month, keeping production and exports halted from the world's second biggest copper mine.

The strike has, for the moment, little impact on copper futures, which are based on cathodes and are bogged down by negative sentiment over the global economy.

But market players said the supply disruption is holding up industry talks over annual contracts for treatment and refining charges (TC/RC) of concentrates in the physical market.