Copper steadies

Copper steadied on Thursday consolidating after recent sharp losses following good corporate earnings in the U.S, although concerns remained after a slew of poor US data and a bond auction in Spain failed to dispel worries over Europe's debt. Three-month copper on the London Metal Exchange ended flat at $8,050, with the metal having hit a three-month low at $7,885.25 earlier this week.
A Spanish debt sale earlier this session saw decent demand for the two- and 10-year paper, but the auction fell short of market expectations - keeping unease about the single currency area in sharp focus. Meanwhile, in the US new claims for weekly jobless benefits came in above forecasts, existing home sales fell unexpectedly last month, while a measure of factory activity in the mid-Atlantic region was worse than expected.
US stock markets, a proxy for economic growth prospects, whethered the storm of poor data though, with solid earnings from Bank of America and Morgan Stanley keeping risk aversion at bay. "Macro sentiment has worsened since the start of the week because of the numbers, it's not mass risk aversion but its not perfect. It's time for copper to consolidate because it suffered some losses at the start of month," said VTB Capital analyst Andrey Kryuchenkov.
Hopes for more Chinese monetary easing were stirred by a report by China's official Xinhua news agency that the country may increase liquidity via open market operations and a cut in banks' required reserves to steer the economy to a soft landing. But with copper warehouse stocks still at high levels in China, sentiment would still be fairly soft, analysts said, until concrete signs of demand emerged.
"As long as stockpiles remain high in China, copper consumers will continue to stay away even if prices slip. It's not a matter of price levels now, but a matter of confidence. We need something to boost morale - be it news of the economy picking up, or of stockpiles going down," said CIFCO analyst Zhou Jie. On a positive note, the head of the International Monetary Fund said member countries had committed $316 billion toward new IMF resources to help contain the debt crisis in the euro zone.
But lingering fears over a slowing global economy remain, as data showed Spain's banks continued to battle sliding house prices and a looming recession. Bad loans rose to their highest level since October 1994 in February, to stand at 8.2 percent of their credit portfolios.
In market structure, pressure remained for holders of short positions for April delivery. Cash copper was last seen at an $88-a-tonne premium to the three-month contract by the close of business on Wednesday. "The backwardation has eased but does not appear to have gone away as there is still tightness right through to April 27. It seems that the short positions have been rolled over to nearby dates," said one LME trader.
"Since the backwardation is due to certain parties holding a dominant long position on the LME and not due to an actual pickup in real demand, I think the squeeze will persist into May," a Singapore-based trader said. In other metals, aluminium ended up at $2,073 a tonne, while tin closed higher at $21,375. Zinc ended at $2000, up 0.40 percent. Battery material lead closed at $2,080 from $2,045, while nickel ended up at $17,600.