Copper slips on firm dollar, weak economic outlook

Benchmark copper on the London Metal Exchange fell to $8,815 a tonne by 0917 GMT from a close of $8,909 on Monday.

The metal used in power and construction eased on the back of a firmer dollar after worse-than-expected German growth data raised fears of a slowdown and added pressure to policymakers to come up with a solution to the euro zone's debt crisis.

Reflecting the cautious stance in markets, European stocks fell sharply, with investors awaiting a Franco-German summit later in the day at which President Nicolas Sarkozy and Chancellor Angela Merkel will meet to discuss potential solutions to the region's debt crisis.

"The weak German GDP figures, weak European equity markets and the ongoing euro zone debt problems are all weighing on sentiment," said Leon Westgate, analyst at Standard Bank.

"The focus has shifted back to the fundamentals in terms of the health of the global economy. There is a fear of a double dip recession in Europe and China is still wrestling with inflation. It's going to be a long process before confidence really returns to the market."

Last week, copper eased on fears about the global economy and growth prospects in China, which accounts for nearly 40 percent of total copper demand estimated at around 19 million tonnes this year.

But with three-month LME copper still trading at a discount to the November copper contract on the Shanghai Futures Exchange, there remains an incentive for the Chinese to import although price-sensitive buyers will likely wait for costs to stabilise.

"The appetite hasn't been there. The Chinese are quite price sensitive. They bought aggressively on the dip late last week and they have stepped away again so that support isn't there anymore," Westgate said.

LME copper is trading 8 percent lower in the year to date after losing more than 10 percent so far this month.

The arbitrage has been open since early this month and traders say that may boost China's refined copper imports in the fourth quarter as buyers increase spot bookings.

TECHNICALS EYED

Gains in copper on Monday lifted the metal to within a whisker of $9,000, seen as a resistance level, and hit a session high at $8,980.

"Prices don't look yet in position to challenge the most immediate resistance just above $9,000. Most likely reason is the lack of substance to justify yet a rally of significance," Triland said in a note.

LME data showed a rise of 4,675 tonnes for copper stocks held at LME warehouses in Rotterdam, in the traditionally quiet summer period when demand is typically weak.

Aluminium slipped to $2,378 a tonne from Monday's close of $2,375. Data showed a rise of 21,675 tonnes of the metal into LME warehouses in Detroit. For a special report, click on

Tin fell to $23,850 from $24,400, while zinc, used in galvanising, traded at $2,166 from $2,183 on Monday.

Copyright Reuters, 2011