MELBOURNE: London copper dropped nearly 1 percent on Monday while London nickel jumped in volatile trade as Chinese markets returned from an extended autumn break.
China returned to a spate of encouraging readings of its economy. Business confidence among entrepreneurs has picked up for the second quarter in a row in 2016, while average new home prices in China's 70 major cities rose 9.2 percent in August from a year earlier.
Higher property prices in China are set to feed fresh developments, in turn boosting demand for metals like copper and nickel in consumables and finishings.
But that may not be sufficient to counter the impact of a stronger dollar and ample supply this year, analysts said.
"We tell people stay away from copper, we still see a move to $4,400 towards year-end" said analyst Dominic Schnider of UBS Wealth Management in Hong Kong.
"I'm still convinced that China has imported too much. With that in mind, a stronger dollar and some shaky leading indicators, for copper that combination is a lethal one."
Three-month copper on the London Metal Exchange had fallen 1 percent to $4,738 a tonne by 0240 GMT, after closing little changed in the previous session.
Prices had hit their highest in more than three weeks on Friday at $4,794.50 a tonne, and have marked out a new floor around the 100-day moving average, last at $4,740.
Shanghai Futures Exchange copper rallied 1.4 percent to 37,160 yuan ($5,571) a tonne.
LME nickel held a 2-percent advance at $9,920 a tonne, paring last week's 6.2-percent losses as investors rushed to cover short positions. LME zinc traded up about 0.4 percent.
Expectations that the U.S. Federal Reserve may hike interest rates in December may find further grounding in comments from a meeting this week. A stronger dollar erodes demand for commodities by making them more expensive for purchases paying with other currencies.
Hedge funds and money managers reduced their net short positions in COMEX copper contracts in the week to Sept. 13, U.S. Commodity Futures Trading Commission data showed on Friday.
Meanwhile, Anglo American said on Friday it had reached a wage agreement with two unions at its flagship Los Bronces copper mine in central Chile, ending a strike that began a week ago.
Russian aluminium giant Rusal expects aluminium prices to stabilise within a $1,600-1,700 per tonne range next year if China does not increase production, global stocks keep falling and demand grows.
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