SHANGHAI: London copper futures touched a one-week high on Tuesday, buoyed just above $7,800 by bargain hunters betting on European and Chinese leaders taking steps to reinvigorate their economies.
Uncertainty about the euro zone and the overall global economy are however likely to cap copper's gains. The metal is on track to lose over 7.5 percent this month, sharply cutting its year-to-date gains to around 2 percent from as much as 15 percent in February.
Three-month copper on the London Metal Exchange touched a week-high of $7,816 a tonne in the session, before paring gains. It was up 0.6 percent to $7,775 by 0343 GMT.
The most-active September copper contract on the Shanghai Futures Exchange edged down 0.1 percent to 55,830 yuan ($8,800) a tonne, after short-covering pushed the contract up to a session high of 56,100 yuan shortly after the open.
Investors are hoping to see fresh measures from Wednesday's EU summit, which is intended to focus on specific steps to spur growth and create jobs across the bloc.
Among the ideas to be raised at the summit will be French President Francois Hollande's proposal for mutualising European debt, as European leaders struggle to restore market confidence after investors started mulling the possibility of Greece exiting the region a month ago.
In top copper consumer China, Premier Wen Jiabao called for additional efforts to support growth, signalling Beijing's willingness to take action after recent data suggested the world's No. 2 economy will slow further in the second quarter.
Backing up Wen's stance, the state-run China Securities Journal reported on Tuesday that the Chinese government will fast track its approval of infrastructure investments to combat slowing growth and a sluggish property sector.
The market is also keenly waiting for the possible roll out of subsidies for home appliances by as early as June, which could boost the amount of copper China uses up in manufacturing the products.
"While all this news points to steps in the right direction, Beijing has been hinting for some time that it would tweak policies to stimulate the economy and embarking on more infrastructure investments," said a Shanghai-based trader with an international firm.
"We are looking out for concrete signs of improved demand outlook, such as downstream industries reporting a surge in orders. Copper is boosted by short-covering and equities the session," he added.
The head of major miner Xstrata's copper unit believes Chinese demand for copper is likely to improve in the second half on the year, as they typically see a cyclical return to demand in the second half of the year in China.
The miner also pledged to lift output by about 60 percent over three years after some rivals have put the brakes on expansion.
In the United States, a top Federal Reserve official said circumstances were not ripe for more quantitative easing as the world's biggest economy needs "measured" efforts to bolster growth.
Atlanta Federal Reserve Bank President Dennis Lockhart also urged the central bank to make more effort to give the public and financial markets a better understanding of how it would react to incoming information on the economy.