LME copper slips as dollar firms; Europe in focus

LME copper slips as dollar firms; Europe in focus

Euro zone debt woes back in focus

* Bernanke retracts QE3 hint

* Coming up: U.S. Industrial prod/Capacity use, June; 1315



(Updates prices, adds quotes and details)

By Carrie Ho

SHANGHAI, July 15 (Reuters) – London copper edged down on

Friday, paring early gains, as the dollar steadied with

investors shifting their focus to Europe’s debt woes from

Standard and Poor’s warning that it could cut U.S. credit


Three-month copper on the London Metal Exchange

edged down 0.3 percent to $9,601 a tonne by 0725 GMT.

Prices had climbed to $9,674 earlier in the session as the

dollar briefly came under selling pressure after the S&P’s

warning, but the impact on the greenback was shortlived perhaps

because Moody’s had already raised the possibility of a


Ratings agency S&P’s warned it could cut the triple-A rating

of the U.S. if a deal on raising the government’s debt ceiling

is not reached soon.

The U.S. Treasury has warned that it will run out of money

to pay the country’s bills after Aug. 2 if the $14.3 trillion

borrowing limit is not raised. Failure to seal a deal by then

could cause turmoil in global financial markets and plunge the

U.S. into another recession.

Federal Reserve Chairman Ben Bernanke warned that

overzealous cuts to government spending in the short term could

derail a shaky recovery.

Bernanke earlier raised hopes of the U.S. central bank

embarking on a third round of economic stimulus, but in

testimony to the senate on Thursday he said the central bank was

not yet ready to take action.

“…The possibility of QE3 wasn’t clear in the first place,

so now that it’s taken off the table, it doesn’t hurt that

much,” Dongzheng Futures trader Du Xiao Hua said.

The euro zone debt worries were also weighing on market

sentiment. The European Banking Authority will publish results

of its health check of 90 banks across the European Union later

in the day.

Policymakers and bankers are examining radical proposals to

rescue Greece that include a sharp cut in its debt burden, ways

to prop up banks and a new emphasis on boosting Greek growth,

official and banking sources say.

The most-active September copper contract on the Shanghai

Futures Exchange fell 0.7 percent to close the session

at 71,640 yuan per tonne.

“What’s stopping ShFE copper prices from surging higher

right now is the fact that prices are too high while credit is

still tight in China. But downstream demand is good with end

users reporting strong orders on their books,” Du said.

But, looking forward, analysts are optimistic about copper’s

longer term outlook.

“There is a healthy appetite for copper at the moment, but

the Chinese are very disciplined traders – they like to buy but

only at the right price. I think we’ll see China buying on a

purely hand-to-mouth basis and just waiting for dips [in

prices],” said Citigroup analyst David Thurtell.

Barclays Capital analyst Chen Xinyi said: “We remain

confident that the Chinese are buying copper, albeit on a

hand-to-mouth basis.”

“Going forward into the second half of the year,

even with such ‘hand-to-mouth’ mode of operation and refined

copper production being very strong, we still expect some pickup

in Chinese refined copper imports, which will be supportive for

international prices,” she added.

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