London - Copper prices rose on Monday, rebounding from falls in the previous week as the euro rose against the dollar although gains were capped by uncertainty about the demand outlook from top consumer China and weak US economic data.
Three-month copper on the London Metal Exchange climbed 0.9 percent to $7,469 a tonne by 11:51 SA time from a close of $7,406 on Friday. It hit an 8-month low of $7,331.25 last week and is down more than 3 percent over the past three weeks.
Helping cement gains was a rise in the euro against the dollar, which makes commodities priced in the US unit cheaper for holders of other currencies.
In a sign of improving risk appetite in financial markets, European equities rebounded from Friday's sell-off.
But gains for copper are likely to be temporary given the uncertain outlook for demand, analysts said.
“The demand outlook is looking shaky at best for most of the world. The Chinese growth picture is unlikely to be as strong as many have anticipated and inventory levels are high,” said Ross Strachan, economist at Capital Economics.
LME copper stocks and ShFE inventories are sitting around their highest levels in a decade, while stocks in Shanghai's bonded zone are close to record levels.
Also keeping investors cautious was data last week showing US employers hired at the weakest pace in nine months in March, a sign tax hikes that kicked in early this year as part of Washington's austerity drive could be stealing momentum from the economy.
The Federal Reserve reaffirmed last week that eventual “normalization” of interest rate policy is still far in the future while the Bank of Japan last week unveiled massive stimulus steps to revive the economy and end deflation.
“Sentiment towards copper continues to deteriorate with many commentators expecting a lengthy period of surplus, something we have been warning of for fully a year now. CESCO Week may play a leading role in setting the tone for Q2 13,” BNP Paribas said in a note to clients.
The world's biggest copper conference, CESCO, gets under way in Santiago, Chile, this week.
BULLISH BETS CUT
Hedge funds and other big speculators have cut their bullish bets on commodities by the most since February, trade data showed on Friday, amid signs of a stagnating US economic recovery and uncertainty over raw materials demand.
In copper in particular, speculators increased their net short by 8,915 contracts to 38,951 contracts in the week to April 2, the latest data showed. That is the shortest the market has been since at least the start of 2006.
Inventories also continue to rise.
In other metals, aluminium rose to $1,890.50 from a last bid of $1,886.50 on Friday while zinc climbed to $1,894 from a last bid of $1,883.
Tin was at $22,911 from Friday's close of $22,895, nickel rose to $16,180 from $15,950 and lead was at $2,065 from $2,045. - Reuters