London - Copper slipped on Tuesday from a near two-week high in the previous session as a stronger dollar weighed and investors remained concerned about economic prospects in top metals consumer China.
The dollar held firm near four-week highs against a basket of currencies, supported by expectations of an end in US monetary stimulus.
A stronger dollar makes dollar-priced metals costlier for non-US investors.
Three-month copper on the London Metal Exchange CMCU3 was down 0.3 percent to $6,957 a tonne by 11:36 SA time, bringing losses for the year so far to around 12 percent.
Copper on Monday climbed 3.4 percent, spurred by bargain-hunting and by data showing upbeat US, British and Japanese manufacturing activity while European activity appeared to stabilise.
Investors quickly turned their focus to Chinese data, also released Monday, which showed that activity among large goods producers had slowed to multi-month lows as demand dried up from customers at home and abroad.
“Concerns about China are worrying, especially as regards liquidity, (and) on the supply side things are improving. That said, metals have really priced in most of the negative news, so nearer term, we could see a bit of a short-covering bounce,” Credit Suisse analyst Karim Cherif said.
Markets awaited US non-farm payrolls data for June, which is due on Friday, for signals about the health of the world's largest economy and hints on when the Federal Reserve may begin to taper off its supportive bond-buying programme.
On the plus side for copper, the premium for cash copper versus the three month price rose to $8.50, its highest point since mid-July, which indicated a squeeze on near-term supplies.
In Shanghai, meanwhile, copper drew some support from a flurry of demand for financing purposes in China.
Some trading companies have been importing metal before selling it onto the domestic market in return for cash, pushing up premiums for copper in bonded zone stores and underpinning prices.
Bonded copper premiums in China have soared to $190-$210 above LME copper prices from $140-$155 a month ago. (http://www.shmet.com/)
Also Chinese stock markets have steadied in recent days as investors, spooked by last month's cash crunch, took heart from official reassurances of ample liquidity in the financial system.
“We believe there will be a series of relief rallies, with (metals) prices looking near the bottom, but any upside will be short-lived given the weaker outlook on China,” ANZ said in a note. - Reuters