SINGAPORE: Copper dropped almost a percent in Shanghai on Monday, reversing the previous session's gains, while London prices were mostly flat, as a firm dollar weighed on prices amid euro zone debt worries.
Copper for delivery in three months on the London Metal Exchange inched down 0.07 percent to $8,784 per tonne by 0336 GMT, following a rebound of 0.7 percent on Friday from Thursday's five-month low.
The most-active July copper contract on the Shanghai Futures Exchange fell 0.9 percent to 65,880 yuan by its midday close. It rose 3.5 percent on Friday from Thursday's low.
"Shanghai copper has fallen more than London this morning because it had a big rally on Friday, but London did not catch up in proportion after Shanghai closed," said China Futures Co analyst Yang Jun.
"So we are now seeing an adjustment on Shanghai."
According to 24-hour technical charts, copper prices are expected to drop to 64,110 yuan per tonne in Shanghai and $8,636 per tonne in London.
Morgan Stanley said it expected base metals price volatility to persist in the near term, but added that the long-term outlook for most metals looked good.
"Prices have not moved a lot today and the market seems unsure of where they should end up," said Great Wall Futures analyst?Li Rong.
"In the short term, we are in a period of uncertainty when the dollar seems to be on a long-term stabilisation trend, whereas there hasn't been any particularly negative macroeconomic data as yet," he said.
FIRM DOLLAR WEIGHS
The firmer dollar weighed on prices of major commodities. US crude futures dropped more than 1 percent to below $99 a barrel, erasing Friday's gains. Gold and silver also edged lower.
The euro extended its losses and hit a two-month low against the yen and a six-week trough versus the dollar as Greece's debt crisis continued to weigh.
Euro zone finance ministers are likely to back a bailout package for Portugal on Monday, with new conditions set by Finland. The meeting was also expected to pressure Greece to announce more austerity steps to secure further emergency funding.
But the arrest of IMF chief Dominique Strauss-Kahn in New York on Sunday on sexual assault charges may cause slight delays in the resolution of the Greek issue in the short term.
Investors were also eyeing developments related to the US debt limit and interest rates to gauge the impact on demand for base metals from the world's largest economy.
President Barack Obama on Sunday warned Congress that failing to raise the US debt limit could lead to a worse financial crisis and economic recession than 2008-09 if investors began doubting US creditworthiness.
"Any bad news about US debt pressurises the base metals market. But the market is less worried about the US than about euro zone debt.
"There is widespread belief that the US will not change its current course of a loose monetary policy and a weak dollar any time soon. And that's enough for the market for now," said Yang.
In industry news, Japan's Sumitomo Metal Mining and Sumitomo Corp said on Monday they had agreed to invest about $724 million in Minera Quadra Chile to join a copper mine project.
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