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London copper slips on US fiscal cliff fears
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Thursday, 22 Nov 2012
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Reuters reported that London copper slipped for a second day after a warning by Federal Reserve Chairman Mr Ben Bernanke renewed worries about the US budget crisis and as traders moved to the sidelines ahead of global manufacturing data due out this week.

Prices however are likely to get support from hopes that demand may improve from top copper consumer China amid signs that an economic recovery is taking hold.

Mr Matt Fusarelli an analyst at Australia-based consultancy AME Group said that "Over the next four months China's economy is looking better than it was four months ago. It's unlikely we would see Chinese PMI fall back below 50 going forward into November, December and January, ahead of the Lunar New year."

China's industrial output, exports and retail sales were all better than expected in October while inflation eased more than expected. Traders however were waiting for more manufacturing data from China, Europe and the United States to provide a clearer picture of global growth and metals demand into next year.

China's HSBC flash PMI for November is due to be released on Thursday, the same day as European data. US manufacturing figures are also due later on Wednesday. Three month copper on the London Metal Exchange eased 1.14% to USD 7,694 per tonne by 0702 GMT.

The most traded February copper contract on the Shanghai Futures Exchange edged down 0.78% to close at CNY 55,900 per tonne. Copper has lost momentum after staging its biggest once day rally since September on Monday when hopes US lawmakers would be able to avert a looming fiscal crisis boosted markets.

Bernanke's comments that failing to halt the fiscal cliff USD 600 billion in tax increases and spending cuts due to start in January could lead to recession dented appetite for riskier assets.

Patchy global growth prospects also clouded the outlook for commodities. US housing starts rose to their highest rate in more than four years in October but permits for future construction fell. Japan's exports fell in annual terms for a fifth month in October 2012.

Copper is facing additional pressure from record high stockpiles in China which accounted for 40% of global demand for the metal last year.

A Singapore based trader said that the market is short here so could see some short covering into year end on any move up. Below USD 7,550 we will see the corporate coming back in. I can't see any break out of USD 7,600 to USD 7,800 range before year end.

Source - Reuters


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