Copper falls as early LME losses are capped

BASE metals closed lower on the London Metal Exchange overnight, as conflicting macro economic news toyed with market sentiment.

Copper trading was particularly choppy amid generally volatile trading, fluctuating between $US9696 and $US9555 a metric ton. The red metal closed down 0.8 per cent at $US9610/ton at the PM kerb close.

Copper recovered some of its early-day losses as successful bond auctions in Spain and Italy boosted risk sentiment. Although the auctions proved expensive, both countries reached their maximum bond targets, with Spain selling €3 billion （$4bn） of the April 2016-dated bonds and Italy selling €6bn.

After falling to $US9573.25/ton, copper hit $US9654.50 in the wake of the news.

US jobless numbers that came in higher than expected weighed on the copper market later in the day, prompting the metal to hit an intraday low of $US9555/ton. Copper, which has a variety of industrial uses, is particularly sensitive to any data pertaining to the health of the economy.

Initial unemployment claims in the world’s biggest economy increased by 35,000 to 445,000 last week, compared with economists' expectations for a decline.

Copper's moves are a sign of the market's “incredible sensitivity to any dent in economic data”， said Barclays Capital analyst Gayle Berry. She added that, in the absence of interest from China - the world's largest consumer of metals - the market has been looking elsewhere for direction.

China is winding down for the Chinese New Year on February 3, and has been largely absent from the copper market in past weeks.

While news that Rio Tinto’s aluminium business has declared force majeure on supply of the metal from Boyne Smelters in Queensland failed to boost the price of aluminium, analysts remained positive about the metal's short-term prospects.

“Combined with the extension of power curbs in China （affecting） the availability of material domestically, the development of aluminium market fundamentals offers the logic of further upward momentum in prices in the short term, in our view,” said Barclay's Capital in a daily report.

Overnight, Rio Tinto declared force majeure after severe flooding cut off road and rail access between the Boyne smelter, near Gladstone, Queensland - and its port in the state capital of Brisbane. The miner is currently looking for an alternative port to ship from.

LME three-month aluminium traded down 0.8 per cent at the PM kerb close, at $US2484/ton.