copper firm ahead of fed

Copper firm ahead of Fed
Tue 18 Sep 2007, 9:07 GMT


LONDON (Reuters) - Copper prices held firm on Tuesday as markets awaited a decision on interest rates from the U.S. Federal Reserve, while aluminium hit an 18-month low on worries about falling demand from the United States.

Generally firmer base metal prices and a pledge by the British Government to guarantee all deposits held by Northern Rock helped boost London stocks including miners such as BHP Billiton and Rio Tinto.

Copper for delivery in three months on the London Metal Exchange was at 0935 GMT at $7,525/7,540 a tonne compared with $7,500 on Monday and Friday's one-month high at $7,622 a tonne.

The U.S. central bank is expected to cut its benchmark funds rate by at least 25 basis points to 5.0 percent later on Tuesday to help cushion the U.S. economy from credit market turmoil and a housing market slump.

"The market has been focused on (the Fed) over the past couple of weeks particularly given the issues in the U.S. subprime mortgage market," said Daniel Hynes, metals strategist at Merrill Lynch.

Some analysts are calling on the Fed to slash rates by half a percentage point to calm investor nerves about the credit freeze and stave off the possibility of a U.S. recession.

"If the Fed were to cut by 50 basis points today, that would probably mean that the Fed's outlook for the real economy has worsened more than publicly available data suggest," Rabobank said in a research note.

Economic slowdown in the United States and the chances of it spreading to other countries could mean lower copper prices, although many analysts expect demand from the fast-growing China to support prices of industrial metals.

However, traders said stalled talks and the rising chances of a strike by workers at Southern Copper Corp could underpin copper prices.