NEWS - Financial Markets
Published 5:47 AM, 28 Nov 2009
Last update 7:36 AM, 28 Nov 2009
Copper steady; Dubai default fears remain
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By Maytaal Angel and Rebekah Curtis of Reuters
LONDON - Copper was steady after hitting a two-week low, as fears that Dubai might default on its debt eased a little and as the dollar pared earlier gains.
Benchmark copper on the London Metal Exchange ended at $US6,855 a tonne compared with Thursday's close of $US6,821. Earlier the metal used in power and construction hit $US6,620 - its lowest since mid-November.
Global shares sank on Friday but later recouped their losses as markets assessed the significance of the debt problems in Dubai.
Dubai said on Wednesday it would ask creditors of state-owned firms Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step towards restructuring.
"Dubai-related contagion overnight saw (us) dive and then the buy-the-dip brigade came to the resuce," said Randy North, a trader at RBC Capital Markets. "The dollar has given up its gains, gold has recovered, and oil is off the lows."
The dollar, perceived as a safe haven asset, pared gains against a basket of currencies as risk aversion subsided somewhat. A weaker dollar makes dollar-priced metals more attractive for non-US investors.
Also helping metals recover, European leaders said the world economy was strong enough to cope with the setback while banks outside the Gulf played down their exposure to Dubai debt.
But analysts remained concerned: "Throughout the crisis, governments have looked to prop up some assets. Abu Dhabi's apparent reluctance to bail out its neighbour may mark a watershed," RBC Capital Markets said in a note.
Prices exceed fundamentals
Also weighing on copper were lingering concerns that prices of the metal, which have more than doubled this year, have run ahead of fundamentals as demand outside China, the world's top consumer, remains weak.
Stocks of copper in LME warehouses continued to climb, up 3,000 tonnes at 435,075 tonnes, their highest level since late April.
Nickel inventories at LME warehouses rose 2,034 tonnes to 135,480 tonnes, their highest since early 1995. Stainless steel making ingredient nickel ended at $US16,085 a tonne from $US16,575, having earlier hit a four-month low of $US15,751.
Battery material lead was last bid at $US2,290 from $US2,340, after earlier plunging 8 per cent to $US2,145 a tonne, its lowest since early October.
Aluminium ended at $US2,016 from $US2,009, having hit a 2-week low of $US1,950, and zinc finished at $US2,230 from $US2,256, having earlier fallen to a two and a half week low of $US2,130.
China's top aluminium producer, Aluminium Corporation of China (Chinalco), said it had restarted most of its idled capacity of alumina and primary aluminium.
Tin ended at $US14,895 from Thursday's last bid of $US14,990.
LME tin slipped into contango, a discount of $US5/10 for cash material versus the three-month price. This marked its first visit into contango territory since late June, and versus a backwardation as high as $US730 in late September.