Copper hits 4-mth high on US, China stimulus hopes

LONDON (Reuters): Copper hit a four-month high on Monday as hopes for more policy easing in the United States prevailed and as weak copper and other commodity imports in China, coupled with weak factory activity, reinforced prospects for more stimulus measures there.

Chinese data showed copper imports in August fell 2.9% from July due to still-sluggish downstream order books and lower financing demand. Industrial production meanwhile ran at its slowest rate for 39 months.

The data cemented hopes that China will adjust policies soon to lift an economy mired in its softest period of growth in three years.

The government on Friday announced a $150-billion infrastructure building programme, while a media report on Sunday said it would provide subsidies worth $2.2 billion to buyers of energy-efficient computers and air-conditioners.

Moreover, investors were still betting the U.S. Federal Reserve will embark on another round of quantitative easing, with disappointing U.S. employment numbers increasing the chances of such action, according to a Reuters poll.

Three-month copper on the London Metal Exchange CMCU3, rose 1.28% to $8,092 per tonne by 0928 GMT, having earlier hit a four month high of $8,109.75. This is the first session in which copper has broken above $8,000 since May 14.

Aluminium, lead, and zinc also touched four-month highs.

“Investors are hoping for another cut in (China’s) reserve requirement ratio for banks, or another rate cut,” said Michael Hewson, senior markets analyst at CMC Markets.

“They’re also getting excited that the Fed will ease monetary policy, but I’m a bit skeptical about central bank measures that stimulate demand because demand needs to be there in the first place, otherwise all you’re doing is making cheap credit available.”

Limiting gains in copper, the euro eased against the dollar, while global stocks dipped as investors cashed in ahead of a German ruling on the euro zone’s new bailout fund, Dutch elections and potential new stimulus from the U.S. Federal Reserve.

A weaker euro makes dollar-priced metals costlier for European investors.

“Hopes for additional monetary easing apparently trump weak economic data in the current environment. In this context, this week’s Fed meeting will be a major event risk. The announcement of further easing could trigger additional price gains - particularly for metals,” said Credit Suisse in a note.

The euro zone is entering a dangerous week, strewn with potential landmines, in a more optimistic mood after investors welcomed a European Central Bank plan to prevent a breakup of the single currency.

Wednesday’s German Constitutional Court ruling is critical, though most legal experts expect the court will allow an EU bailout fund and budget pact, although it will likely impose conditions to show that parliament controls Germany’s budget

Meanwhile, Madrid intends to discuss conditions attached to the ECB’s bond-buying plan with euro zone finance ministers this week while a European Union finance ministers’ meeting is set for Sept. 14-15.

Zinc, used in galvanizing rose 0.96% to $1,989 a tonne, having earlier hit its highest since early May at $1,997.25, while sister metal lead, used in batteries, rose 2.06% to $2,135, having also hit its highest since early May at $2,143.

In industry news, commodities trader Glencore laid out its raised $36 billion all-share bid for Xstrata on Monday, warning it would not improve the terms again after making concessions to recalcitrant shareholders.

In other metals traded, aluminium rose 1.01% to $2,042.50, having hit its highest since late May at $2,049.25. Soldering metal tin rose 2.11% to $20,370 a tonne, while stainless-steel ingredient nickel rose 1.33% to $16,720, having hit its highest since early July at $16,802.