London - Copper steadied on Monday as traders saw value in a metal trading near three-month lows, though prices were kept firmly in check by political stalemate in the United States and Italy and by China's plans for tighter controls on its property sector.
China, which accounts for 40 percent of refined copper demand, could increase required downpayments and loan rates for buyers of second homes in cities where prices are rising too quickly, in its latest move to contain housing costs.
Copper is used extensively for both wiring and building houses.
Investors also had to contend with the aftermath of an inconclusive election in Italy that has cast doubt on the euro zone's austerity-led solution to its debt crisis, and with US spending cuts that threaten to dampen growth in the world's largest economy.
“There's awful lot of surprises this year and none of them good. Relative to original expectations (US spending cuts) could easily
knock 1 to 1.5 percentage points off growth,” said Nic Brown, head of commodities research at Natixis.
On China, he added: “Real estate has been a very important part of Chinese growth and for the authorities to be clamping down on it even if the rest of the economy is doing well, this is a dent in expectations for Chinese growth.”
Three-month copper on the London Metal Exchange edged up 0.26 percent at $7,720 a tonne by 12:30 SA time, as early technical-led
gains washed away and sentiment soured in wider markets.
Copper fell to its lowest in more than three months on Friday at $7,652 a tonne, hurt by worries over Chinese growth and US spending.
It shed more than 4 percent in February, more than erasing its gains for the year.
Except for zinc, the main LME contracts all hit 2013 troughs on Friday.
Denting prices, the dollar traded near a 2-1/2 month high versus the euro after euro zone sentiment tumbled in March.
A strong dollar makes dollar-priced metals costlier for European and other non-US investors.
Also weighing, data on Sunday showed growth in China's services sector expanded at its slowest pace in five months in February.
Last week meanwhile, data showed China's factory growth cooled to multi-month lows in February.
HOPES PINNED ON DOWNSTREAM DEMAND
Property sector curbs and slowing factory growth in top consumer China have dented sentiment towards metals, said Judy Zhu, an analyst at Standard Chartered in Shanghai.
“But what I see and hear in the copper market is that consumption is now improving seasonally,” she said.
“Downstream consumers, especially the air conditioner sector, may have to replenish their stockpiles in the coming weeks. We see
mild upside risks in the next month or two - $7,600-$7,700 for copper is a pretty good buy.”
Latest LME stock data, however, brought further headwinds for copper bulls, showing stocks up at 462,400 tonnes, the highest since
early October 2011, and amounting to a rise of around 200,000 tonnes since early December.
Also, ShFE copper stocks surged by 18,492 tonnes, or 8.9 percent, data on Friday showed.
“The technical picture continues to look poor and many model based traders are now getting themselves short in base metals,” said RBC Capital in a client note.
“Trade buyers are appearing again on dips and we would expect the Chinese to have interest in copper should the red metal get down to $7,500, but its hard to justify a position either way at the moment.”
In other metals traded, soldering metal tin edged up 0.22 percent to $23,300 a tonne, while zinc, used in galvanising fell 0.40 percent to $2,013 a tonne.
Battery material lead fell 0.33 percent to $2,236.5 a tonne, aluminium fell 0.25 percent to $1,970.5 a tonne, while stainless-steel ingredient nickel edged down 0.08 percent to $16,583 a tonne. - Reuters