Base metals rocket on China stimulus news

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    By Nick Trevethan of Reuters

    SINGAPORE -- London copper prices jumped eight per cent, while nickel rose 11 per cent and Shanghai copper hit its upside limit in the wake of China's plans to pump almost $US600 billion into the economy to support growth.

    Other industrial metals also gained, with lead and zinc both up around five per cent and aluminium four per cent firmer after China launched a stimulus plan on Sunday, kicking off what could be another round of big spending or interest rate cuts by leading economies to stave off a recession.

    That, and a pledge by the G20 group representing 90 per cent of the world's economy to take all necessary measures to get financial markets back on their feet, helped offset negative sentiment following a rise in US unemployment rates to a 14-year high and after US automakers on Friday reported billions in losses.

    "There will be some direct impact of this on metals demand, but it's the trickle-down effect that will really give consumption a boost -- general spending by the Chinese public," a dealer in Perth said.

    "The big miners are still highlighting the positive long-term picture for China. Beijing can loosen credit controls further, relax taxes and pump even more money in. But this doesn't signal the restart of a bull run -- not until we start to see inventories coming down.

    London Metal Exchange copper rallied to $US4,035 a tonne at 1507 AEDT on Monday, up 7.5 per cent from Friday. LME zinc rose 5.4 per cent to $US1,150 and lead added 4.7 per cent to $US1,425.

    Earlier copper jumped as much as 8.4 per cent, while nickel was as high as $US12,250, an 11.6 per cent rise.

    Not to be outdone, the benchmark Shanghai copper contract rose 1,190 yuan from Friday's settlement to its upside threshold of 31,000 yuan. By midday, copper had ticked back to 30,990 yuan.

    "Metal prices in Shanghai and London were spurred by China's 4 trillion-yuan stimulus plan, which is also lifting the equity market," said Yang Yongbin, senior researcher at HNA Topwin Futures.

    "The plan involves a huge amount of investment in infrastructure and transportation construction, which could improve fundamentals. However, the global economy is still in a downtrend...and we will not have a clear idea of direction until the second half of next year."

    On Friday, Shanghai copper fell by its downside limit to touch 29,540 yuan, its weakest since mid-2005, under pressure on speculation that large amounts of imported metal were making their way towards the spot market.

    Shanghai stocks recorded a small 151-tonne drop last week to 24,637 tonnes. But inventories on the LME rose 2,250 tonnes to 254,800, their highest since the first quarter of 2004.

    Other Shanghai metals were less bullish. Aluminium rose 0.9 per cent to 13,870 yuan, while zinc gained 1.8 per cent to 9,470 yuan.

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