copper rebounds

Metals - Copper up as traders take comfort from rebound in US equities UPDATE
August 07, 2007: 07:18 AM EST


(Updates prices, adds details)
LONDON, Aug. 7, 2007 (Thomson Financial delivered by Newstex) -- Copper edged up as traders took comfort from yesterday's rebound in US equities, which helped ease concerns that the troubles in the US housing and credit markets are spreading to other markets.

'In overnight trading the metals firmed further, encouraged by the 286 point rally in Dow,' said BaseMetals.com analyst William Adams.

The Dow registered its biggest gain in nearly five years yesterday, recovering from recent sharp losses that were sparked by concerns over the current troubles in the US housing market.

Those concerns had weighed on copper in recent weeks as traders bet on a decline in demand for the metal if the US economy faltered. The US is the world's largest consumer of base metals after China.

At 11.45 am, LME copper for three-month delivery was trading up at 7,700 usd a tonne against 7,690 usd at the close yesterday.

'Trading will probably be limited today ahead of the FOMC statement tonight - due at 19:15 UK time, well after the close of London trading,' said UBS (OOTC:UBSLF) (NYSE:UBS) Investment Bank analyst Robin Bhar.

He added that, while the slight recovery today is linked to the rebound in US equities, metals like copper could easily give back their gains later if the Fed shows 'no sign of a quick reaction to the current risk aversion'.

In fundamental news, however, copper remains supported by the ongoing strikes at copper mines owned by Grupo Mexico, and by renewed strike threats at South Copper Corp's Peruvian operations.

JP Morgan analyst Michael Jansen said he remains upbeat on copper even though sentiment in the metal has been dented recently by the US economic woes and the steady rise in LME stocks.

This is because global exchange inventories remain quite low, supply threats are ongoing while China's underlying economic momentum remain as robust as ever.

Elsewhere, lead was up at 3,115 usd a tonne against 3,094 usd, recovering from a plunge yesterday that knocked nearly 7 pct off the metal's value.

However, analysts said concerns remain that lead, which hit a series of all time record highs last month, could turn lower through the year end as mine production recovers.

On the other hand they note that for now, the metal still has to contend with falling LME stocks, lower smelter output in China and falling export levels, and ongoing problems with mine supply.

Lead production at Ivernia's Magellan mine in Australia is still shut in on environmental grounds, while the strike at Exarro's Rosh Pinah plant continues for now.

Nickel climbed to 29,400 usd a tonne versus 29,200 usd at the close yesterday, as players took their cue from the broader rebound in metals and overlooked yet another large gain in LME monitored nickel stockpiles.

The LME said in a daily report stockpiles held in its warehouses rose by 726 tonnes to 16,674 tonnes, while cancelled warrants or pledges to take delivery edged up by only 24 tonnes to 492 tonnes.

'Cancelled warrants remain very low at only 492 tonnes indicating very little imminent demand for nickel, which is consistent with what we have heard from the physical market and the public statements from the stainless industry,' Bhar said.

Tin rose to 16,300 usd a tonne against 16,150 usd, zinc was up at 3,395 usd versus 3,350 usd, while aluminium edged up to 2,658 usd versus 2,652 usd at the close yesterday.

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