Copper rose almost 2 percent on Friday, paring losses accumulated earlier in the week, spurred by a successful bond swap in Greece, reassuring job data from the US and expectations China could ease monetary policy further and boost demand for metals.
Benchmark copper on the London Metal Exchange (LME) closed at $8,490, up almost 2 percent from a close of $8,330 on Thursday. Boosting the outlook for metals demand, data showed that employment in the US grew solidly for a third straight month in February, a sign the economic recovery was broadening.
"The data reassured the market a bit, and the Greece situation has been solved, but all this is going to be behind our back next week when the focus will be on new macro headlines," said metals analyst Edward Meir at INTL FCStone. "The focus is shifting from Greece to Portugal, Spain and Italy of course. There are going to be new headaches."
Greece averted the immediate risk of an uncontrolled default by winning strong acceptance from its private creditors for a bond swap deal, which will ease its massive public debt and clear the way for a new international bailout. "Industrial metals mostly gained as rumours of a possible RRR cut in China and more optimism regarding Greece ... benefited prices," ANZ analysts said in a note.
China's annual consumer inflation slowed sharply to a 20-month low at 3.2 percent in February, and factory output and retail sales also cooled more than forecast, giving policymakers ample room to further loosen monetary policy to support flagging growth.Further monetary easing steps in China, which cut its bank's reserve requirement ratios (RRR) in November and February, could help boost demand for industrial metals, analysts said.
China is the world's top consumer for copper, accounting for as much as 40 percent of total demand. "After the inflation rate dropped to 3.2 percent there is more room for monetary easing. Although we do not expect another rate cut, we expect further reduction in the reserve requirement ratio," said Daniel Briesemann, analyst at Commerzbank.
"Given China's current five-year plan in which growth is still one of the highest priorities, there is definitely a need for base metals. I am convinced we will see a pickup in demand later in the year." China's copper output continued to grow last month, with refined copper production in February rising 9.5 percent from a year earlier to 437,000 tonnes. But imports data to be released on Saturday is likely to show a drop in copper imports last month with the arbitrage window between the LME and Shanghai shut since early January.
Low premiums on Chinese copper and near-decade high stockpiles of the metal in Shanghai warehouses suggest oversupply in China with demand slower than expected. Copper stockpiles in Shanghai warehouses rose another 3,294 tonnes to 224,781 tonnes, data from the SHFE showed on Friday, the highest level since July 2002.
In contrast, copper stocks in warehouses monitored by the LME dropped by 4,000 tonnes to their lowest level in more than 31 months at 276,025 tonnes, data from the LME showed on Friday. Zinc closed at $2,070 a tonne from a close of $2,049 on Thursday, and lead at $2,120 a tonne from $2,124 at the close on Thursday. Tin finished at $23,200. It was untraded at the close on Thursday, but was bid at $22,750. Aluminium ended at $2,240 from a close of $2,206 on Thursday and nickel closed at $19,300 from $18,800.