SHANGHAI |
SHANGHAI (Reuters) - London copper slipped on Monday from the previous session's one-week high as surging grains futures drew away some buying power, while investors waited to see if this week's presentation by the U.S. Fed chairman would yield any clues on monetary easing.
But losses were reined in by hopes of further stimulus from top copper consumer China after Premier Wen Jiabao said Beijing would step up efforts to boost the economy. Recent data showed China slowed for the sixth successive quarter to expand by 7.6 percent in the three months from April to June.
Any move by Beijing to ramp up infrastructure spending would bolster demand for industrial metals, especially copper.
Three-month copper on the London Metal Exchange inched down 0.3 percent to $7,680.25 per metric ton (1.1023 tons) by 3.20 a.m. EDT. Prices rose 1.9 percent and hit a one-week high at $7,730 in the previous session.
"London base metals have fallen this morning as Chinese investors are sidetracked by trading in agricultural products such as soybeans and soybean meal," said a Shanghai-based commodities broker. <GRA/>
The most-active October copper contract on the Shanghai Futures Exchange rose 0.7 percent to 56,170 yuan ($8,800) per metric ton, catching up with London's previous gains.
"There's a lot of latent buying power out there waiting for the right time to enter the base metals markets as many expect more stimulus by Beijing soon," the broker said.
"I've advised my clients to cut short positions and be ready to take up fresh long positions," he added.
During a tour of Sichuan province, Chinese Premier Wen said that the government would "increase efforts to preset and fine-tune its policies" to help combat risks that lie ahead for the world's second-largest economy.
Comments by state-backed media on Monday also suggested that a slew of pro-growth measures could be unveiled as early as Wednesday, with economists expecting Beijing to boost investment spending to sustain growth.
SHANGHAI COPPER FLIPS INTO CONTANGO
In physical markets, the Shanghai copper forward curve flipped into a contango on Monday after being backwardated since early May, indicating less tightness in immediate supply.
"There is more immediate supply now as copper prices have risen to a level that sellers are comfortable selling at, while ShFE stocks have also increased steadily since mid-June," said an executive with a copper fabricator.
Shanghai copper stocks had risen 23.7 percent on Friday to 160,928 metric tons from 130,143 metric tons on June 15.
"The contango also indicates more optimism over China's economy in the second half of the year on anticipation of more aggressive stimulus by Beijing. The market thinks copper prices should be higher in the forward months," he added.
But investors are likely to stay cautious ahead of Fed chairman Ben Bernanke's semi-annual monetary policy report to Congress on Tuesday and Wednesday, in case the central bank surprises with fresh stimulus measures.
"Many things will have to happen before the U.S. rolls out more quantitative easing, but we have to be vigilant before Bernanke's report in case of surprise developments," Great Wall Futures analyst Li Rong said.
In the minutes released last week of the Fed's June 19-20 policy meeting, the central bank kept open the option of a third round of outright bond purchases, or quantitative easing (QE) in market jargon, if the economy took a marked turn for the worse, but appeared to set a high bar for such aggressive action.
Underlying concerns over the global economy may cap base metals, after U.S. consumer sentiment cooled again in early July to its lowest level in seven months.
Also, the debt crisis that grinds on in the euro zone continues to blur the demand outlook for most commodities.
Italian 10-year government bond yields rose on Friday, winning little respite from a solid debt sale as a surprise ratings cut by Moody's highlighted the risk that the euro zone's third biggest economy could eventually fall victim to the debt crisis.
($1 = 6.3789 Chinese yuan)
(Editing by Ed Davies and Himani Sarkar)
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