Copper rises 1% but sentiment remains brittle
SINGAPORE, (Reuters) -
Shanghai copper rose almost 1 percent on Thursday after a late recovery in London continued, but sentiment was fragile after ratings agency Standard & Poor's added Spain to its list of euro zone sovereign debt downgrades.
The euro was flat, having rallied from one-year lows on Wednesday after the U.S. Federal Reserve left interest rates near zero and gave an upbeat assessment of the U.S. economy.
But with Standard & Poor's slashing of credit ratings for Greece to junk status and a downgrade of Portugal on Tuesday and a one notch cut for Spain on Wednesday, concerns of spreading sovereign credit risks in the euro zone are keeping sentiment brittle.
"The metals were probably a little over extended, copper and nickel, in particular and we were quite happy to see a correction. (Euro zone debt) hasn't posed a risk to our growth forecast, but we will be monitoring potential contagion effects across the continent," Morgan Stanley analyst Joel Crane said.
"Our greater concern is China. If there is any downside surprise, that is where it will come from. In particular we are focused on further measures Beijing might impose on the
Three-month copper on the London Metal Exchange CMCU3 rose $65 to $7,465 by 0418 GMT on Thursday, having tumbled from above $7,850 at the start of the week.
From a technical perspective, copper is poised for a rebound above $7,600 on a short-term basis, Reuters technical analyst Wang Tao said. [TECH/C]
However, he pointed out that the primary trend is bearish with a target of $7,141 and that a drop below the support level of $7,374.75 would signal that the bearish trend has resumed.
Benchmark third-month Shanghai copper SCFc3 rose 480 yuan to 58,780 yuan. The more active fourth month, August SCFQ0 rose 0.8 percent, or 510 yuan, to 58,960 yuan.
"Chinese consumers are still waiting to buy. These prices are quite attractive but there is a feeling the international market will fall further, and we will have the chance for better bargains," a trader in Shanghai said.
"There is still plenty of copper in China, no one needs to rush to get metal, but if it looks like the LME has bottomed and will run higher again, we will see lots of local investors chasing prices."
Markets were cheered after the U.S. Federal Reserve ended a two-day meeting keeping rates on hold and affirming its accommodative policies.
The Fed's decision to keep rates at "exceptionally low" levels "for an extended period" undermined the U.S. dollar and helped lift gold prices to highs for the year.