SHANGHAI: London copper rose to its highest in a month and Shanghai futures surged by their daily limit for second day on Tuesday on optimism that European leaders are moving closer to solving the region's debt woes, boosting hopes demand may recover.
European policymakers neared a deal over the weekend on bank recapitalization, and euro zone officials said France and Germany were close to agreement on how to use the European Financial Stability Facility to stave off contagion in the bond market.
That optimism buoyed Asian shares and other commodities although equity investors in Europe were jittery before a crucial meeting of European Union leaders.
"Worries over the euro zone crisis have abated...People are starting to think that a lot of commodities have been oversold and there is renewed interest in buying," said Great Wall Futures analyst Li Rong.
Three-month copper on the London Metal Exchange rose as much as 2.4 percent to $7,820 a tonne, a level not seen since Sept. 22. By 0718 GMT, it was up 0.7 percent at $7,689 a tonne.
Copper, one of the hardest hit commodities in the past quarter when it lost more than a quarter of its value, climbed nearly 7 percent on Monday, its biggest single-day gain since January 2009, as hopes for a euro zone debt deal and upbeat manufacturing data from China drew buyers back.
HSBC's flash purchasing managers' index (PMI), released on Monday, showed China's manufacturing sector expanding in October after three months of contraction.
In Shanghai, the most-active January copper contract surged by its daily trading limit for a second straight session, before closing 3.6 percent higher at 56,710 yuan a tonne.
"Trading has been quite active over the past few days with lots of buying and short covering," said Li, adding that falling copper stockpiles at warehouses, which suggests recovering demand, had encouraged investors.
German lawmakers flexed their muscles to secure a full parliamentary vote on the euro zone crisis measures negotiated by Chancellor Angela Merkel and her euro zone peers, a move senior politicians said would give Merkel a stronger mandate.
But deep divisions over the extent of losses that private holders of Greek bonds would have to accept remain a huge risk and final decisions were deferred until a second summit scheduled for Wednesday.
Business surveys showed China's economy taking a stride forward in October but also revealed the euro zone's debt crisis might already have pushed the bloc's economy back into recession.
Copyright Reuters, 2011
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