Reuters

Fri Aug 3, 2012 3:35pm EDT

* U.S. non-farm payrolls rise by 163,000 in July
    * Dollar falls vs euro; copper jumps over 1.5 pct
    * Copper open interest reflects lack of conviction
    By Chris Kelly and Susan Thomas
    NEW YORK/LONDON, Aug 3 (Reuters) - Copper jumped by the most in three weeks on Friday after data showing U.S. employers hired more workers than expected
last month deflated the dollar and boosted prices of the red metal away from the bottom end of well-worn range.
    Copper rose alongside a 3 percent rally in crude oil and a late-week surge in equities after the Labor Department said nonfarm payrolls rose 63,000 in
July, breaking three straight months of job gains below 100,000 and offering some hope for the ailing economy.
    But an increase in the jobless rate to 8.3 percent reminded investors of the still-fragile state of the world's largest economy and kept prospects of further
monetary stimulus from the Federal Reserve on the table.
    "The noose ... (is) still around the Fed's neck and everybody is very cognizant of the fact that we could fall off the economic cliff any day," said Adam Sarhan, chief executive of Sarhan Capital in New York.  London Metal Exchange (LME) three-month copper rose $115, or 1.6 percent, to end at $7,445 a tonne, its biggest one-day gain since July 13, when
prices soared by nearly 2 percent.
    In New York, the COMEX September contract rose 7.70 cents, or 2.3 percent, to settle at $3.3675 per lb after dealing between $3.2985 and $3.3740.
    Since May, copper prices have been mired in a range between $7,200 and $7,800 in London and $3.25 and $3.60 in New York, pushed and pulled between a
waning global growth outlook and a tighter supply base and second-half Chinese demand prospects.
    "Although the numbers are decent, they're not so amazing that the Fed are going to turn around and say the economy is fine. It will take a long and
sustained period of improving data for the Fed to say that," said Guy Wolf, a macro strategist at Marex Spectron.
    "If we are moving into an environment where there is no more bad news, copper could get out of this range and move back towards $8,000. If people start
selling U.S. Treasuries, then that money will be seeking a home in places like base metals."
    The jobs report reduced demand for safe-haven assets, including the dollar, which slipped against the euro and a basket of currencies. A weak dollar makes
commodities priced in the U.S. unit cheaper for holders of other currencies.
    A separate piece of data showed the pace of growth in the vast U.S. services sector edged up in July as new orders gained traction, but employment fell to
its lowest level in nearly a year.
    Gains in base metals were capped, however, by lingering concerns about the debt crisis in the euro zone.
    On Thursday, commodity prices fell and copper hit six-week lows after ECB President Mario Draghi failed to offer immediate action to fix the euro zone
economy, which the market had expected to come via an announcement of large-scale bond purchases.
    "There were unwarranted expectations starting from last week of a decisive response by the monetary authorities, until yesterday when it became clear no
fireworks were coming. At least not yet," RBS strategist Nikos Kavalis said.
    ECB INACTION
    The ECB's inaction added to gloom over dismal manufacturing sector reports from China, Europe and the United States this week, with only a small gleam of
improvement seen in China's small- and medium-sized private sector companies.
    China is the world's top copper consumer, accounting for around 40 percent of global demand for the metal used in power and construction.
    "The Chinese growth outlook appears riddled with risk, with soft investment growth likely to weigh on commodities demand over coming quarters. Taken
together, metals demand is likely to remain restrained, which could keep prices at low levels in the near term, National Australia Bank said in a research note.
    Reflecting a lack of conviction about copper's short-term price direction, the open interest in the LME copper contract hovered around near-five-year lows
hit last week.
    LME three-month aluminium ended up $16 at $1,860 a tonne.
    ANZ sees potential for further losses to below $1,600 per tonne, which would add pressure on smelters suffering with thin or negative margins.
    Bosnia's only alumina plant had to halt production on Wednesday after the country's main gas distributor cut supplies because it could not pay its bills.
It resumed production on Thursday after agreeing to pay part of its debt.
 Metal Prices at 1848 GMT
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       336.60        7.55     +2.29     343.60     -2.04
  LME Alum      1859.00       15.00     +0.81    2020.00     -7.97
  LME Cu        7442.00      112.00     +1.53    7600.00     -2.08
  LME Lead      1894.50       40.50     +2.18    2035.00     -6.90
  LME Nickel   15600.00      350.00     +2.30   18710.00    -16.62
  LME Tin      17895.00      465.00     +2.67   19200.00     -6.80
  LME Zinc      1839.00       27.00     +1.49    1845.00     -0.33
  SHFE Alu     15350.00       -5.00     -0.03   15845.00     -3.12
  SHFE Cu*     54300.00     -460.00     -0.84   55360.00     -1.91
  SHFE Zin     14550.00      -15.00     -0.10   14795.00     -1.66
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07

URL: http://www.reuters.com/article/2012/08/03/markets-metals-idUSL6E8J34EG20120803