Copper edges up as markets weigh China data, Fed action

Maytaal Angel
(Blank Headline Received)
Workers at Tenke Fungurume, a copper mine in the southern Congolese province of Katanga, check bundles of copper cathode sheets ready to be loaded and sent out to buyers January 29, 2013. REUTERS/Jonny Hogg

By Maytaal Angel

LONDON (Reuters) - Copper edged up on Wednesday, recouping Tuesday's losses on hopes for improved strength in China's economy and reduced risk of a U.S. strike on Syria, though traders remained mindful about growing supplies and U.S. plans to taper monetary stimulus.

Uncertainty about next week's key U.S. Federal Reserve meeting is keeping copper investors cautious, even though last week's disappointing U.S. jobs data convinced many that any stimulus withdrawal will probably be very gradual.

At the same time, while a string of recent upbeat Chinese economic data has bolstered confidence, it has not been enough to convince investors that demand for the metal is set for a strong revival.

"China is recovering but at a much slower rate than historical norms," said CMC Markets analyst Michael Hewson.

"(Also) inventories are fairly high, so until you start to see an inventory shortfall as well as a pickup in demand, it's hard to make the case for copper to go higher than where we are now."

Benchmark three-month copper on the London Metal Exchange rose 0.56 percent to $7,200 a tonne by 0259 GMT, after falling 0.36 percent to end at $7,170 a tonne on Tuesday.

Copper has risen more than 8 percent since touching three-year lows in June on mounting evidence that a slowdown in China may be bottoming out, but it has been largely rangebound for the past month, and is still down about 9 percent for the year.

Appetite for copper, seen as a risky asset, improved slightly on news that Syria accepted a Russian proposal on Tuesday to give up chemical weapons, though U.S. President Barack Obama said it was too early to tell if the initiative would succeed.

"The crisis in Syria could get resolved relatively quickly. We see the positive economic news coming out of China is lifting copper but it is failing to ignite a rally. The follow through in demand in not there," said Jonathan Barratt, chief executive of commodity research firm Barratt's Bulletin.

Headline China trade data this week showed overall imports and exports in August were stronger than expected, sustaining the July uptrend and indicating that the world's top commodity buyer may have avoided a sharp slowdown.

On Tuesday, data showed China's annual industrial output rose 10.4 percent in August, beating market expectations, while retail sales rose 13.4 percent. China accounts for about 40 percent of global copper consumption.

While the data points to a potential uptick in demand, the evidence is not yet there in LME stocks data, where copper stocks have fallen for the last two days, but at 588,275 tonnes, they remain 22,050 tonnes above a mid-August low.