Copper up on China data, Berlusconi's exit pledge

SHANGHAI: Copper rose on Wednesday after data showed China's inflation slipped in October, easing concerns that the government will further tighten monetary policy.

News of Italian Prime Minister Silvio Berlusconi agreeing to step down also allayed some fears over Italy's commitment to the budget reforms crucial to keeping the euro zone debt crisis in check.

Three-month copper on the London Metal Exchange rose 1.4 percent to $7,905 a tonne by 0402 GMT, after falling 0.3 percent in the previous session.

The most-active January copper contract on the Shanghai Futures Exchange rose 0.8 percent, to 58,310 yuan ($9,188.18) per tonne, after dropping 0.2 percent on Tuesday.

Berlusconi became the biggest political casualty of Europe's debt crisis on Tuesday when he announced he would step down after being stripped of his majority in parliament.

"We saw a rise earlier on short covering on the back of s decent equity close in the US last night, where the markets were cheered by news that Berlusconi had fallen on his sword," said global head of base metals research David Thurtell.

"Later on, base metals were rallying into the benign Chinese numbers. There was a bit of profit taking at the $7,930 level, which caused some gains to be pared," he added.

In a sign that China's economy is in for a soft landing this year, the country's annual inflation rate fell to 5.5 percent in October, a third straight month of decline from July's three-year peak.

Premier Wen Jiabao said prices had fallen further since, fuelling market confidence that the government was gaining control over inflation and was unlikely to back off from more tightening measures.

But lingering worries over the global economy are still expected to limit gains in base metals in the session.

While Berlusconi's expected exit shored up market confidence, Italy is not yet out of the woods, with rising borrowing costs threatening to unleash a new and more dangerous phase of the region's debt crisis.

However, European Union finance ministers failed to agree on Tuesday on how to shore up sagging banks and avert a credit squeeze.

In the United States, deficit-reduction talks hit a bump on Tuesday when Democrats rejected a Republican plan to raise additional tax revenues but at the same time deliver new tax cuts to the wealthy.

The result is that with just two weeks remaining before a Nov. 23 deadline to clinch a deal on at least $1.2 trillion in deficit reductions, Democrats and Republicans are left without a plan.

Copyright Reuters, 2011