LME copper rallies after China policy easing

 

 

Three-month copper on the London Metal Exchange rallied 1.6 percent to $8,308 a tonne by 0301 GMT, after rising to $8,396 earlier in the session. Copper dropped almost 4 percent last week, its biggest weekly loss in nine weeks.

 

 

The most-traded May copper contract on the Shanghai Futures Exchange fell 0.4 percent to 59,520 yuan a tonne.

 

 

"It is a positive reaction (to China's policy easing), but we still have to see how sustainable these gains can be - we would need to see more signs of improving demand from the physical market," Singapore-based analyst Stefan Graber of Credit Suisse Private Banking said.

 

 

"The event that will set the tone for this week is the euro group meeting. Markets are expecting a positive outcome. In previous weeks we have seen that it is very difficult to reach a solution for Greece, so it's not wrong to be a bit cautious."

 

 

China's central bank cut the amount of cash that banks must hold in reserves on Saturday, which is expected to boost lending capacity by more than $50 billion, in a bid to crank up credit creation as the world's second-biggest economy faces a fifth successive quarter of slowing growth.

 

 

Credit has been a major factor constraining commodities demand growth in China, which accounted for around 40 percent of global refined copper demand last year.

 

 

Traders said China's easing steps may still take some time to filter down to metals product makers, with one major domestic trader saying he expects only ancillary impact on his business as such steps do not translate directly into better access to loans.

 

 

"The RRR cut is definitely positive. Copper picked a lot from Friday's close and the arb ratio improved a lot at the start of opening, though it retreated quickly," one Shanghai-based trader said.

 

 

"The physical is still not responding and it may take more time to consume domestic stockpiles, since stocks built on the ShFE on Friday."

 

 

Copper stocks in warehouses monitored by the Shanghai Futures Exchange jumped to their highest in nearly a decade, data showed on Friday, as traders routed metal to the world's top copper consumer on hopes demand will pick up after the Lunar New Year.

 

 

A firm euro on hopes Greece would clinch a second bailout fund also supported markets, sending Asian shares up about 1 percent and lifting oil prices by about $2 per barrel.

 

 

Euro zone finance ministers are expected to approve the 130-billion-euro rescue programme for Greece at a meeting on Monday, and while there is still scepticism over Athens' commitments - including implementing 3.3 billion euros of spending cuts and tax increases - officials said momentum was behind approving the deal.