Metals - Copper up after Friday slump, players await index rebalancing UPDATE
Mon, Jan 7 2008, 10:13 GMT
http://www.afxnews.com
(Updates prices, adds details)
LONDON (Thomson Financial) - Copper recovered from Friday's sharp losses as the market continued to rebound from the end of year slump seen in 2007, and as players awaited the annual rebalancing of commodity investment indexes.
The rebalancing, which sees funds realign the proportions of oil, metals and other commodities held in their index, is benefiting copper and other metals at present, analysts said.
"In the very short term we expect further index fund rebalancing and that is likely to drive prices higher and in turn that could prompt more shorts to cover," said BaseMetals.com analyst William Adams.
He added that overall, the metals market has been consolidating since roughly Dec 17, having become overly negative during the October to December sell off last year.
At 9.49 am, LME copper for 3 month delivery was up at 6,942 usd a tonne against 6,910 usd, despite news of a large 2,400 tonne increase in inventories held in LME warehouses.
Analysts at Macquarie said global copper prices are benefiting from a short term surge in Chinese buying interest, which follows a recent depletion of stocks in Shanghai.
Overall, however, there remains a risk that prices weaken in the medium term as the outlook for demand becomes increasingly shaky, following more bad news from the US.
On Friday, copper fell from a two month high after much weaker than expected employment data out of the US re-ignited fears that the world's second largest copper consumer might yet head into recession.
"Looking ahead to next week and the re-weightings of several commodity indices, it will be interesting to see if prices push higher or whether they just stutter along," said analysts at Standard Bank.
"Given that the physical market in many of the metals has yet to pick up ... once the feeding frenzy of the past few days subsides, a downwards correction cannot be ruled out," they added.
In other metals, tin was up at 16,245 usd against 16,150 usd while nickel climbed to 28,375 usd against 28,200 usd despite a large 342 tonne increase in LME inventories.
Basemetals.com analyst William Adams said despite stocks being at multi-year highs, nickel has risen strongly this year because it was heavily oversold in the fourth quarter of last year.
Elsewhere, metals were little changed, with lead trading at 2,590 usd a tonne against 2,601 usd, aluminium at 2,468 usd against 2,466 usd, and zinc at 2,498 usd against 2,495 usd.
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