Copper prices slipped on Tuesday as the dollar firmed but upbeat economic data from China, the world’s largest consumer, and optimism around U.S. interest rate cuts supported sentiment.

Benchmark copper on the London Metal Exchange was down 0.1% at $9,876 a metric ton at 0935 GMT, but hovered near a five-week high of $9,947 a ton hit on Monday.

A stronger U.S. currency makes dollar-priced metals more expensive for holders of other currencies, which could weigh on demand. Funds use this relationship to buy and sell copper using signals from numerical models.

However, traders said surveys of purchasing managers in China’s manufacturing sector showing expansion in August due to a rise in new orders indicated healthier demand prospects for industrial metals.

Reinforcing this is the Yangshan copper premium (SMM-CUYP-CN), a gauge of China’s appetite for importing copper. At $55 a ton, it is up from $29 a ton on July 8, though still roughly half the $100 a ton level seen in May.

Overall, however, higher copper stocks (MCUSTX-TOTAL) in LME-registered warehouses suggest weaker demand outside China. At 158,775 tons, they have climbed 75% since late June.

Higher LME copper stocks have also reinforced the significant discount for the cash over the three-month forward (CMCU0-3) at around $85 a ton.

Markets are now looking ahead to a meeting of the Federal Reserve on September 16-17, when the central bank is expected to cut rates, which could weaken the dollar and boost metals.

Clues to whether the Fed will go ahead with cuts will come from the monthly U.S. jobs report due on Friday.

Elsewhere, rising stocks of tin (MSNSTX-TOTAL), up more than 30% to 2,175 ton since August 18, has eased some concerns about availability on the LME market, but not enough to narrow the hefty premium for cash over the three-month (CMSN0-3).

Three-month tin retreated 0.3% to $34,855, aluminium was up 0.1% at $2,615, zinc gained 1% to $2,861, lead fell 0.6% to $1,991 and nickel ceded 1% to $15,285 a ton.
Source: Reuters