SINGAPORE: London copper hit its lowest in three weeks on Thursday as talks to avert a US fiscal crisis stalled, keeping investors on edge, but losses were limited by signs of improvement in the economy of top consumer China.
China's economic growth regained momentum into early December, helping copper rally near 8 percent from mid-November, although momentum has since petered out.
Markets are worried that US lawmakers may not meet a year-end deadline to fix expiring spending rises and tax cuts that could tip the world's top economy back into recession, while investors have wound up positions before the Christmas break.
"A lot of people in Western markets are on holiday and that may make the LME market relatively quiet so (prices) are likely to remain around current levels for now," said Chunlan Li, a Beijing-based copper analyst with consultancy CRU.
Talks to avoid a US fiscal crisis stalled on Wednesday as President Barack Obama accused opponents of holding a personal grudge against him while the top Republican negotiator called the president "irrational".
This pushed Asian shares back from their highest in nearly 17 months the day before.
Meanwhile, the money that flowed into US commodity products and funds in November was the smallest in 1-1/2 years and little improvement is expected before year-end as investors worry about the potential fiscal crisis, according to fund tracker Lipper.
Three-month copper on the London Metal Exchange slipped by 0.55 percent to $7,882.50 a tonne by 0302 GMT, adding to losses in the previous session, when prices dropped by more than one percent.
Prices, which rallied nearly 8 percent from mid-November to reach a near 2-month top at $8,162 on Dec. 12, have since lost almost half of those gains, hitting their lowest since Nov. 29 at $7,874.75 earlier in the session.
The most-traded March copper contract on the Shanghai Futures Exchange slipped 1.35 percent to 56,870 yuan ($9,100) a tonne.
China's vast manufacturing sector expanded in December, data showed this month and this has been reflected in small purchases by consumers. China is the world's top copper consumer, accounting for 40 percent of refined demand last year.
"From late November to early December, downstream users in China built up stocks. Demand now is OK but not very strong," Li added.
Premiums for bonded stock in Shanghai have stayed around $40-$60 for several weeks, she said.
Still, prices have found chart based support, said RBC Capital in a note.
"While copper seemed to fall apart today, it is still holding above the key 30, 100 and 200 day moving averages," it said.
Center>Copyright Reuters, 2012
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