Copper bounces

Copper bounced on Tuesday as traders and funds reversed bets on lower prices after China's central bank moved to offset the damage to economic growth and demand from the coronavirus in the top consumer. Traders said consumers not wanting to miss the opportunity to hedge their needs at low prices also contributed to the rise.

Benchmark copper on the London Metal Exchange ended up 1.7% at $5,618 a tonne. Prices of the metal used as a gauge of economic health fell to five-month lows of $5,523 on Monday, marking a drop of nearly 13% since January 16.

Eurasian Resources Group Chief Executive Benedikt Sobotka said he expected gains to be temporary as demand will face headwinds even when the impact of coronavirus has gone away.

"The coronavirus will pass eventually and so will its negative impact on markets," Sobotka said.

"This will pave the way for investors to re-focus on the unfinished US-China trade deal, a still muted global growth outlook and growing uncertainties associated with the November US presidential elections."

China's central bank said its huge liquidity injections through open market operations this week showed its determination to stabilise financial market expectations and restore market confidence.

The People's Bank of China (PBOC) injected a total of 1.7 trillion yuan ($242.74 billion) via reverse repos on Monday and Tuesday.

Hong Kong reported its first death from the coronavirus on Tuesday, the second outside mainland China from an outbreak that has killed more than 420 people.

"While it's tempting to draw comparisons to the SARS epidemic in 2003, China's economy is now much larger and more closely integrated into global supply chains," analysts at Capital Economics said in a note. "An economic shock in China is now more likely to spread to the rest of the world."

Companies are warning that the coronavirus could disrupt supply chains or hurt bottom lines as factories and shops shut and airlines suspend flights.

Factory closures due to coronavirus are sapping demand for sulphuric acid, a byproduct of copper production, and will likely see smelters cut output, industry sources said on Tuesday.

Copper prices face strong resistance at around $5,925 where the 100- and 200-day moving averages are converging. Support is at $5,518 the low on Sept. 3.

Aluminium was little changed at $1,686, zinc gained 0.9% to $2,166.50, lead was flat at $1,825, tin rose 0.6% to $16,300 and nickel added 0.8% to $12,830 a tonne.