Copper rose to a three-week high on Wednesday and approached its biggest daily rise since mid-November, as US Congress struck a deal to avert a fiscal disaster, and upbeat data from top metals consumer China boosted the outlook for demand.
The United States averted economic calamity on Tuesday when lawmakers approved a deal to prevent huge tax hikes and spending cuts that would have pushed the world’s largest economy off a “fiscal cliff” and into recession.
The resolution that came after months of political wrangling sent stocks higher, weighed on the safe-haven dollar and boosted industrial metals that thrive on a better economic outlook. Benchmark copper on the London metal exchange was trading at $8,102 by 1010 GMT from $7,929 in the last ring on Monday, posting its biggest daily gain since mid-November.
Earlier, it rose as much as 2.5 per cent to a session high of $8,130, its highest level since December 12.
“We started off 2013 on a very positive note. The market is thinking the fiscal cliff being resolved quickly leaves the year open to maybe a better-than-expected recovery in the US economy,” Robin Bhar, an analyst at Societe Generale, said.
“The other big thing for the metals market is a strong rebound in China that could be underway; the data is pointing to that. Sentiment is certainly risk-on and the dollar has taken a back seat because of that, so it should be a pretty good beginning for financial markets.”
China’s official manufacturing purchasing managers’ index held steady in December at 50.6, matching November’s seven-month high and adding to evidence that the world’s second-largest economy was headed towards steady growth revival.
Technical analysis suggested that LME copper could rise towards $8,140 after it cleared the resistance at $8,063, Reuters market analyst Wang Tao said.
The metal, used in power and construction, rose by more than four per cent in 2012, following a 21 per cent fall in 2011.
Battery material lead rose to $2,380.25 a tonne, its highest since September 2011.
Tin was the outstanding winner of the base metals complex last year, rising almost 22 percent, while lead rose by 15 percent, zinc by 13 percent and aluminium by 3 percent.
Bucking the trend, stainless steel material nickel lost 9 percent in 2012.
LEAD HITS 15-MONTH HIGH
Battery material lead rose to $2,380.25 a tonne, its highest since September 2011.
"Fundamentally, lead is still a pretty balanced market. Stocks are not excessive, below three-weeks worth of consumption, and we are in a seasonally strong period so there is no reason why prices should not stay at these elevated levels for the next two to three months," Bhar said.
Lead stocks at LME warehouses dropped to 317,700 tonnes, the lowest since early November. The ratio of cancelled warrants -- material earmarked for delivery -- to total stocks rose to a record high of 57 percent.
The average ratio stood at less than 8 percent since the beginning of 2008.
Other metals also strengthened.
Aluminium gained 1.9 percent to $2,112 a tonne, headed to its biggest one-day rise in more than a month.
Zinc was 1.6 percent up at $2,113.25 after hitting a three-month high of $2,118 while tin climbed 1.8 percent to a two-week high of $23,825.
Nickel rose 2.3 percent to $17,456.
