Copper,China, euro zone

Copper up on China stimulus plan, euro zone woes limit gains

29 May 2012 

SHANGHAI (Reuters) - London copper prices edged up on Tuesday after Chinese equities gained on signals that China will soon launch an economic stimulus scheme, but fears that Spain's debt problems will worsen the euro zone debt crisis limited gains.

Three-month copper on the London Metal Exchange inched up 0.4 percent to $7,723 a tonne by 0718 GMT, extending a three-session winning streak during which it has risen 2 percent by Monday's close.

The most-active September copper contract on the Shanghai Futures Exchange closed 0.2

percent down at 56,080 yuan ($8,800) a tonne, after rising more than LME copper in the prior session. But the Shanghai contract pared losses in the afternoon after hitting a low of 55,680 yuan earlier in the session.

"Copper prices were boosted by equities and hopes that the slew of possible stimulus programmes unveiled lately will boost metals demand," said a Shanghai-based trader with an international firm.

The Shanghai composite index <.SSEC> closed 1.2 percent up at more than two-week highs, while Hong Kong shares rose for a third straight session, led by China's infrastructure stocks.

Last week, Premier Wen Jiabao said China will step up policy fine-tuning to support the economy, and construction and infrastructure firms which use a lot of industrial metals and they are seen as the biggest gainers from China's push to avert a sharp economic slowdown.

State-backed media cited unidentified sources on Tuesday saying that China's biggest banks appeared to have accelerated lending toward the end of this month as Beijing starts to fast track its approval of infrastructure investments.

Other reports on stimulus included 26.5 billion-yuan subsidies package to boost domestic spending and possible tax incentives to support the service outsourcing sector.

Analysts noted that copper prices are stuck in a narrow range as many traders are still playing it safe due to the global macroeconomic uncertainties.

"Copper prices are going through a period of consolidation before eking out a new technical range as concerns about the euro zone, China and U.S. economies continue to weigh on prices. But with prices higher than early last week, the shorts are covering and this is supportive," said a Shanghai-based trader.

In Europe, Spanish 10-year borrowing costs neared the 7 percent danger level after the government, struggling to sort out its finances, proposed putting sovereign debt into its struggling banking sector.

Greece handed 18 billion euros ($22.6 billion) to its four biggest banks, underscoring the country's grim finances and fears that debt problems there will widen to other euro zone countries.

Newedge, a broker owned by French banks Credit Agricole and Societe Generale , has told clients it will do no new business in Greece, the latest sign trading houses are preparing for the country leaving the euro zone.