By Melanie Burton
MELBOURNE, Feb 6 : London copper edged up on Monday on supply concerns, finding firmer footing after its biggest daily fall so far this year in the previous session in the wake of surprise economic tightening in top consumer China.
China’s central bank caught financial markets off guard on Friday by raising short-term interest rates on the first day back from a long holiday, in a further sign of policy tightening as the economy shows signs of steadying.
“The raising of rates … surprised the market, and saw a wave of selling emerge as Chinese markets reopened after the Lunar New Year holiday,” ANZ said in a report.
“Sentiment was also impacted by weaker-than-expected factory data. While a surprise, we don’t see this as the start of a sustained trend of selling, with investors still relatively bullish on the sector.” Three-month copper on the London Metal Exchange was up 0.3 percent at $5,786.50 a tonne by 0721 GMT. It lost 1.9 percent on Friday in its biggest daily fall since Dec. 19, with prices reaching their lowest since Jan. 20 at $5,755 a tonne.
Shanghai Futures Exchange copper on Monday slipped 0.7 percent to 46,600 yuan ($6,788) a tonne.
Concerns of kinks in mine supply from Chile and Indonesia have helped turn investor sentiment positive towards copper.
Hedge funds and money managers increased their net long position in COMEX copper contracts to a record in the week to Jan. 31, U.S. regulatory data showed.
Workers at BHP Billiton’s Escondida copper mine in Chile, the world’s biggest, prepared to re-enter dialogue with the company on Friday, after BHP solicited government mediation in a bid to avoid a strike.
“During February, we see the copper market moving higher as we think the odds for an Escondida strike are quite high … Chilean labour unions are more emboldened now, especially considering that prices are up roughly $1,500 a tonne in about a year,” INTL FC Stone said in a report.
INTL sees prices trading in a $5,680-$6,000 range this month.
Also feeding into supply concerns, Freeport-McMoRan Inc , the world’s biggest publicly-listed copper miner, said it would cut staff, spending and production in Indonesia if it did not get a new export permit by mid-February.
Meanwhile, LME nickel prices climbed 1.2 percent to $10,340 a tonne as investors covered short positions on supply concerns after key ore exporter the Philippines closed more than 20 mines.
Other metals were however lower, with LME zinc, used to galvanise steel, falling 1.2 percent, hurt by the hike in China’s interest rates that spurred a sell-off in ferrous metals.