Copper down ahead of EU summit; China demand eyed - Reuters

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Traders and clerks react on the floor of the London Metal Exchange in the City of London February 14, 2012.

Credit: Reuters/Luke MacGregor

SHANGHAI | Tue Jun 26, 2012 10:26pm EDT

SHANGHAI (Reuters) - London copper dropped on Wednesday, snapping two straight days of gains, as investors shied away from riskier assets on growing conviction a European summit this week will fail to resolve the region's intractable debt crisis.

But signs top copper buyer China may be slowly restocking with prices near 2012 lows are likely to check losses.

FUNDAMENTALS

Three-month copper on the London Metal Exchange fell 0.3 percent to $7,335.50 a metric ton by 0126 GMT.

The most-active October copper contract on the Shanghai Futures Exchange fell 0.1 percent to 53,580 yuan ($8,400) a metric ton, stretching losses to a fourth session.

European Council President Herman Van Rompuy on Tuesday released a report on closer fiscal and banking union, envisaging a euro zone treasury that would issue common debt in the medium term. But Germany, two days before the June 28-29 summit, flatly rejected the idea of common euro zone bonds.

German Chancellor Angela Merkel said Europe would not share total debt liability "as long as I live".

Spain's short-term borrowing costs nearly tripled at auction on Tuesday, underlining the country's precarious finances as it struggles against recession and juggles with a debt crisis among its newly downgraded banks.

U.S. home prices picked up in April for the third month in a row, the latest indication that a recovery in the housing market is gaining traction. But in a sign of the struggles still facing the broader economy, separate data on Tuesday showed consumer confidence fell to its lowest level in five months in June.

Copper prices are expected to be supported on indications of restocking by China due to a favorable price arbitrage.

(Reporting by Carrie Ho; Editing by Himani Sarkar)

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