Copper rose on Monday as the dollar fell on expectations Federal Reserve policy will continue to support growth and as sentiment towards risky assets picked up in the wider markets, but gains were capped by concern over demand growth in top metal consumer China.
Three-month copper on the London Metal Exchange ended at $8,533 from $8,380 a tonne at the close on Friday, when the metal closed the week down 1.5 percent. "The market is just waiting for the next trigger. There's probably more bullish (factors) than bearish but we're very much range trading," said Standard Chartered analyst Dan Smith.
"China is a major obstacle. Corporates and traders there are still pretty downbeat, there's a lot of metal sitting in bonded and exchange warehouses ... (but) the US is outperforming on many measures." US stocks rallied after Federal Reserve Chairman Ben Bernanke suggested the central bank would continue supportive monetary policies even as the unemployment rate improves. Pending home sales slid 0.5 percent in February, according to the National Association of Realtors, confounding expectations for a rise of 1 percent.
Bernanke's comments and the housing data pushed the euro to its highest in three weeks versus the dollar. A weaker dollar can lift dollar-denominated commodities by making them less expensive for consumers using other currencies. Copper has gained about 10 percent this year, spurred by improved economic data from the United States, the world's largest economy, ultra-loose monetary policy in the western world and moves to stem Europe's debt crisis.
"The markets are very much focussed on macroeconomics, so any kind of comments deemed to be even remotely positive, the markets are going to act well on the back of," Barclays Capital analyst Gayle Berry said. The HSBC flash purchasing managers index (PMI), the earliest indicator of China's industrial activity, fell back to 48.1 in March from February's four-month high of 49.6. New orders sank to a four-month low, an expected rebound in export orders failed to emerge and new hiring slumped to a two-year low, surveys showed last week.
China accounts for 40 percent of global copper consumption.
Data showed copper stocks in warehouses monitored by the Shanghai Futures Exchange fell 1.6 percent on the week, though they remained near their highest in almost a decade. In the western world, LME stocks continued to fall, with the latest data showing them down 1,175 tonnes at 255,175 tonnes, their lowest since November 2008 and equivalent to just 4.5 days of global demand.
"We are cautious on prices in the very short term, with the loss of Chinese apparent demand at about $8,400 per tonne unlikely to be totally offset by the improvement coming from ex-China," said Macquarie in a note. In other metals, lead closed at $2,002 a tonne from a last bid of $1,995 on Friday. China's consumption of refined lead has risen this month, industry sources told Reuters last week, because of higher output of lead-acid batteries, manufacturers of which are the country's top users of the metal. Tin closed at $22,500 from $22,225, zinc at $2,021 from $2,005, aluminium at $2,186 from $2,174 and nickel at $18,255 from $18,175.