Copper falls on China PMI

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    Copper has dipped on worries about demand in the world's top metals consumer after data showed the biggest fall in China's factory activity since the financial crisis.

    The metal used in construction and electrical generation initially bounced from near four-week lows as short sellers took profits but bearish sentiment eventually got the upper hand once the short-covering had run its course.

    Traders said a turnaround in the oil price, which went into the red late in the European session, also weighed on the market.

    Three-month copper on the London Metal Exchange closed down 0.5 per cent at $US5,057 a tonne after falling 3.6 per cent to $US5,036 on Tuesday - its weakest since August 27 and its biggest one-day slide in more than two months.

    China's factory activity unexpectedly shrank to a six-and-a-half-year low in September, intensifying fears that a slowdown in the world's second-largest economy will spread.

    China consumes nearly half the world's copper.

    "China was bidding the price up into the ShFE (Shanghai Futures Exchange) close. I suspect profit taking. They hit it (copper) pretty hard yesterday," said Vivienne Lloyd, analyst at Macquarie.

    "On a fundamental basis I don't think copper prices should be here but speculators are scared and they are inclined to sell." Copper hit a six-year trough of $US4,855 a tonne in August.

    China's factory activity has now shrunk for seven months in a row, and the latest survey showed conditions in September deteriorated from August by almost every measure.

    In supply-side news, Newmont Mining Corp's Indonesian copper export permit will not be renewed as the US miner has failed to meet government stipulations for developing a domestic smelter, officials said.

    "We are confident supply will tighten in the next few months because production cuts have already been announced. This should cause the market to tighten and allow the copper price to recover," said Commerzbank in a note.

    Zinc was the best performer, climbing 1.4 per cent to finish at $US1,651 a tonne, eroding steep losses seen since last week on bets inventories would rise as Glencore sold down its stock.

    Traders were taking profit from a zinc-lead switch trade, buying back zinc they had sold and selling lead, a trader said.

    Aluminium sagged 0.8 per cent to close at $US1,576 a tonne as analysts said fundamentals were worsening with a glut of overproduction and inventories keeping pressure on prices.

    Consultant Gianclaudio Torlizzi of T-Commodity in Milan told the Reuters Global Base Metals Forum that technical signals were also negative.

    "The break below $US1,590 was a confirmation that the bullish mode is over," he said, adding that there was potential for prices to drift back to the August low of $US1,506.

    Tin rose 0.9 per cent to $US14,925 a tonne; lead closed 0.9 per cent higher at $US1,698; while nickel, untraded in closing rings, was bid up 0.4 per cent at $US9,725.

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