London - Copper gained on Wednesday, rising above $7,000 a tonne briefly, helped by physical buying and short covering following hefty falls, but further gains were capped by uncertainty about the outlook for global economic growth.
Three-month copper on the London Metal Exchange (LME) rose to $6,970 a tonne, up 1.5 percent from a close of $6,870 a tonne on Tuesday.
It hit a session high of $7,053 its highest since late last week, but was trading not far from 18-month lows of $6,762.25 a tonne hit on Tuesday.
The metal used in power and construction fell 5.6 percent last week, and is down 0.2 percent so far this week.
“The bounce today is a reaction to the fact that markets got oversold from the last few days. Sentiment got a bit too bearish due to weak data from China and Europe,” said Robin Bhar, analyst at Societe Generale.
“These lower prices are attracting good physical buying. There seems to be good physical demand at these levels and that is allowing a floor to be established at the 7,000 level.”
While a drop in momentum in major North American, European and Asian economies capped prices, expectations that this would lead to more quantitative easing measures from global central banks curbed selling pressure on riskier assets, such as metals.
German business sentiment fell in April for the second consecutive month, missing even the lowest estimate in a Reuters poll but the data helped reinforce expectations that the European Central Bank might cuts rates at a meeting next week.
“Weak economic data is not positive for demand but at the same time you could get central bank support and that puts a floor on price falls for commodities,” Bhar said.
SHORTS COVER
Copper is eyeing its 2011 low of $6,635 a tonne, opening the door to price levels last seen in July 2010, broker Sucden said in a note.
“That being said, the CTAS (commodity trading advisors) are very short now and the surprise could be to the upside, especially if Chinese central banks decide to weigh on the stimulus games like other central banks,” it said.
In other metals, aluminium rose to $1,906 a tonne from Tuesday's close of $1,895.50 a tonne.
Norsk Hydro, one of the world's biggest aluminium makers, beat first-quarter earnings forecasts due to higher prices, sales and cost cutting and predicted demand for the metal would return to levels that match supply this year.
Battery material lead climbed to $2,035 from $2,015, while soldering metal tin rose to $20,900 from $20,560 a tonne.
Stainless-steel ingredient nickel was at $15,266 from $15,130 and zinc rose to $1,901 from $1,879. - Reuters