Copper hit near one-week high, Europe steps reassure

Benchmark copper on the London Metal Exchange (LME) rose to $7,184.75 a tonne, its highest in nearly a week and up close to 5 percent from Wednesday's close of $6,820 a tonne. At 0933 GMT, the metal used in power and construction was trading at $7,125 a tonne.

German Chancellor Angela Merkel said on Wednesday Berlin was ready to recapitalise its banks if needed, while the European Union's executive is proposing that member states carry out a coordinated recapitalisation of banks in the face of mounting concerns about a Greek default.

A fall in the dollar also helped cement gains in the metal, with the dollar slipping against a basket of currencies. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.

"We have seen a slight move higher in the euro/dollar and improvement in risk appetite, which is driving the market," said Christin Tuxen, analyst at Danske Bank.

"We have had a major selloff in copper prices and we are at levels that are close to marginal costs. We need prices at decent levels in order to ensure investments in long-term supplies so we might soon be bottoming out in the copper market.

Highlighting a recovery in investor sentiment, European stocks rose sharply while German government bonds fell.

Adding to the improved outlook was data on Wednesday that showed growth in the vast US services sector slowed modestly in September, though new orders rose, according to the Insitute for Supply Management.

The market is likely to focus on a policy decision by the European Central Bank at 1145 GMT. The central bank is expected to resume longer-term lending to banks and is also set to prepare the ground for a rate cut before year-end, although bets on a 50 basis point cut on Thursday have been scaled back after inflation jumped last month.

INDONEDIAN STRIKE

Freeport McMoRan Copper & Gold Inc's union on Thursday extended a strike at a massive gold and copper mine in Indonesia's remote Papua province to Nov. 15, an official said.

Chief Executive Richard Adkerson said on Wednesday the company was unable to make up a production shortfall from strikes in Peru and Indonesia as it already operates at full capacity.

Copper prices were also expected to get a boost in the coming week when exchanges in China re-open after week-long national holidays. The lack of buying from the Asian nation has capped gains, traders said.

Copper prices added to small gains in the previous session. On Monday it fell to a 14-month low of $6,636 a tonne.

"We would allow for a short-term rally into the 7,406/7,884 band. This is the location of the 23.6 percent and 38.2 percent retracements of the sell off. Rallies should remain capped by the 8,504 May low," Commerzbank technical analysts said in a note.

Aluminium rose to $2,205.15 a tonne from Wednesday's close of $2,170. LME data showed a fall of 4,850 tonnes of the metal mostly from LME-registered warehouses in Detroit.

Copper stocks fell by 3,200 tonnes, according to data from the LME.

Tin earlier rose to a one-week high of $21,725 a tonne, before later trading at $21,695 from Wednesday's close of $21,100. Zinc, used in galvanising, traded at $1,880.25 from $1,845 on Wednesday.

Battery material lead rose to $1,930 from $1,892 while nickel rose to $18,800 from $18,400.

Copyright Reuters, 2011