METALS-London copper eases, US stimulus hopes lend support

Melanie Burton
Sunday, 27 Oct 2013 | 11:22 PM ET

* Zinc may rally on chart-based buys, short covering-Triland

* CFTC data shows investors add to spec long copper position

* Coming Up; 1315 U.S. Industrial output

(Adds analyst, trader comment; updates prices) SINGAPORE, Oct 28 (Reuters) - London copper edged down on Monday, but was holding above a two-week low hit in the previous session, as hopes the U.S. Federal Reserve will maintain its massive stimulus programme into next year underpinned prices. Weak U.S. economic data and fears top consumer China may tighten credit have eroded the outlook for metals demand, with LME copper falling almost 1 percent last week. "I don't think there will be any huge surprises coming out of this week's Federal Reserve meeting - they will leave asset purchases on hold," said Tim Radford of Sydney-based advisor Rivkin. Asset purchases tend to be supportive for base metals by eroding the dollar, and by increasing liquidity available to business and commodities investors. "We have Chinese PMI (purchasing manufacturer's index) on Friday. If we see any upside in those numbers we'll probably see support for metals. For now commodity markets are trapped in range and I can't see them going anywhere until we see some real economic trends establish themselves," Radford said. Three-month copper on the London Metal Exchange eased by 0.2 percent to $7,170 a tonne by 0249 GMT, but above Friday's low of $7,113. LME copper dropped last week for a third week in four, but remains in the wider $7,000-7,420 range it has held since early August. The most-traded January copper contract on the Shanghai Futures Exchange edged up 0.1 percent to 51,470 yuan ($8,500) a tonne. Orders for a wide range of U.S.-made capital goods plummeted in September and consumer sentiment weakened sharply in October, signs that a budget battle in Washington has held back the economy. Economists and market participants widely expect Federal Open Market Committee members to hold steady on purchasing $85 billion of assets next month when they meet on Tuesday and Wednesday. Most expect the central bank to delay tapering its stimulus to at least March next year. China money rates and policy are also in focus after they shot up last week to their highest levels since June as regulators signalled they are considering mild tightening to rein in rampant inflation in the country's housing market. Metals imports are commonly used as a way to circumvent the country's strict currency controls, as traders obtain dollar based credit to import metals that are then resold on the local market, with the money raised used to invest in higher yielding local assets like real estate. A clamp down on this sector, or on credit, could erode metals demand. A top Chinese leader has promised "unprecedented" economic and societal reforms at the Communist Party's much anticipated plenum meeting next month, state media reported on Saturday. Before that, markets will get a reading on China's manufacturing activity, with official PMIs on Nov. 1. Reflecting an improving view on copper for the week ended Oct. 1, hedge funds and money managers increased their net longs in copper futures and options by 2,549 lots to 7,832, according to the CFTC as it begins to release its postponed reports after the partial U.S. government shutdown. In other metals, broker Triland said zinc prices may rise further this week, as growing confidence in the auto and steel sectors could spark fresh chart-based buying, since prices closed above the 200-moving day average on Friday. "If consumers have run down stocks as much as possible, as we hear they have done, they may well be forced to pay higher prices before too long," it added in research note. LME zinc traded down 0.4 percent on Monday and has shed around 5.5 percent this year, but is still the second best performer in a weak base metals complex, behind tin with losses of around one percent. Base metals prices at 0249 GMT

Metal Last Change Pct Move YTD pct chg LME Cu 7170.00 -15.00 -0.21 -9.57 SHFE CU FUT JAN4 51470 60 +0.12 -10.77 HG COPPER DEC3 3.26 -0.01 -0.17 -99.11 LME Alum 1881.75 1.75 +0.09 -9.14 SHFE AL FUT JAN4 14400 35 +0.24 -6.16 LME Zinc 1948.00 -7.00 -0.36 -5.60 SHFE ZN FUT JAN4 15065 -480 -3.09 -3.09 LME Nickel 14550.00 -30.00 -0.21 -15.19 LME Lead 2193.00 -12.00 -0.54 -6.28 SHFE PB FUT 14440.00 55.00 +0.38 -5.31 LME Tin 23200.00 0.00 +0.00 -0.85 LME/Shanghai arb^ -431

PRICES Three month LME copper Most active ShFE copper Three month LME aluminium Most active ShFE aluminium Three month LME zinc Most active ShFE zinc Three month LME lead Most active ShFE lead Three month LME nickel Three month LME tin

($1 = 6.0840 Chinese yuan)

($1 = 6.0840 Chinese yuan)

(Reporting by Melanie Burton; Editing by Himani Sarkar and Richard Pullin)