LONDON/NEW YORK: Copper rose on Friday on a retreating dollar and firm US economic data, but anxiety over the euro zone's sovereign debt woes threatens to curb the red metal's gains going into next week.
Industrial metals have fallen this year as Europe's problems stunt economic growth, sap banks' lending for commodity trading and threaten to dampen demand for goods exported by emerging nations.
A steadier tone in wider markets, and a halt in the slide of the euro against the dollar was lending metals some support on Friday. A softer dollar makes commodities less expensive for holders of other currencies.
"Copper is rallying with other commodities, primarily due to macro prospects," said Peter Buchanan, commodities analyst and senior economist at CIBC. "It's not a good picture overall, but it's perhaps not as bad as it could be."
Government data showed US inflation pressure waning, fanning expectations the Federal Reserve could do more to boost economic growth. The latest consumer price report followed data on Thursday suggesting a possible pick-up in job growth, which has been meager during the current recovery.
Three-month copper on the London Metal Exchange, closed at $7,345, from $7,211 on Thursday's close.
The metal is down around 6 percent for the week, on track for its biggest weekly loss since the end of September and the first annual decline since 2008, when the global credit crunch was at its worst.
In New York, the key March COMEX contract jumped to trade $3.3190 per lb., a gain of 5.15 cents or 1.58 percent, and is on track to post its first percentage increase of the week.
Opportunity buying following copper's hammering on Wednesday, when it dropped 5 percent, also boosted the metal on Friday.
Surprising resilience in the US economy and corporate sector underpinned investor appetite for risky assets into the year end, although trading is thinning out ahead of a holiday season.
US jobless claims on Thursday fell to a 3-1/2-year low and a survey showed New York factories picked up speed this month.
"But there's still no real sense of global economic growth getting stronger," said Darin Newsom, metals analyst with DTN. "And copper really needs to see that. I'm going to guess... that by the end of (next) week we're under pressure in the copper market again."
TURBULENT
Possible cuts in the credit ratings of euro zone countries are looming after a key European Union summit last week offered little respite to turbulent euro zone bond markets and cash-starved European banks.
"The relative stability in the European debt markets and the Euro is leading to some modest buying setting in," said Edward Meir, analyst with Intl FCStone.
Europe's top central banker said that euro zone governments are on the right track to restore market confidence but reminded them that an emergency programme to buy their bonds was "neither eternal nor infinite".
The volatility the crisis has caused has led to losses at brokers and banks.
Credit Agricole this week said it will stop trading commodities and slash its financing of the multi-billion-dollar commodities trade as the euro zone crisis worsens.
Price gains may be capped as production at mines resumes following labour disputes.
Freeport McMoRan Copper & Gold Inc expects full operations at its Indonesia mine to start by early 2012 after reaching a pay deal on Wednesday to end a three-month strike that paralysed output at the world's second-biggest copper deposit.
But warehouse inventories of copper are rising.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 9.4 percent from a week earlier, while stocks in warehouses monitored by the LME fell 825 tonnes to 381,250 tonnes, representing around a week's worth of global consumption.
"This is the second week which copper inventory in Shanghai moved higher. For the second week running cash copper is trading at a discount to the SFE January contract which is resulting in metal flowing into Shanghai warehouse," said Standard Bank in a research
Three-month tin was $18,800, from $18,600 at the close on Thursday.
Indonesia, a major global producer of raw materials, plans to impose export taxes on a range of commodities, including metals and rubber, as part of a raft of new fiscal policies for next year, the industry minister said on Friday.
Aluminium finished at $2,005, from $1,975. Zinc ended at $1,868 from $1,844.5, lead was $1,960 from $1,875, and nickel closed at $18,550 from $17,895.
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