SINGAPORE: London copper fell to a one-month low on Wednesday as renewed worries over Greek and Spanish sovereign debt hit risk appetite and curbed expectations of metals demand, before erasing losses alongside the euro to trade little changed.
Soaring borrowing costs for Spain and concerns that Greece may not meet its bailout terms fueled jitters about the euro zone, knocking fragile confidence after a report showed an improving economic picture in China on Tuesday.
China is the world's top consumer of copper, accounting for 40 per cent of refined demand last year. A report on Tuesday showed China's manufacturing output in July grew at its fastest pace in nine months, which helped briefly improve sentiment towards metals.
“People are still shifting their thinking to accept less than double digit growth from China. We do know that Chinese demand has slowed, but it's certainly not a negative outlook for copper,” said Matt Fusarelli, analyst at Australia-based consultancy AME Group.
“The catalysts just aren't here for another short-term price rally ... But we do expect prices to recover towards the later part of the year,” he added.
Three-month copper on the London Metal Exchange traded at $7,436.25 at 0246 GMT, up 0.26 per cent from the previous session when it logged a small advance. Prices earlier fell to $7,355 a tonne, the lowest since June 28, and are down just over 2 per cent for the year.
The most-traded November copper contract on the Shanghai Futures Exchange traded flat a 54,480 yuan ($8,500) a tonne.
Investors continued to give the euro and risk currencies a wide berth on Wednesday following a selloff in global stocks as worries about the euro zone debt crisis festered, however the euro was off its intraday lows.
Spain paid the second highest yield on short-term debt since the birth of the euro at an auction on Tuesday, and EU officials said Greece had little hope of meeting the terms of its bailout, casting fresh doubt on its future in the euro zone.
A softer dollar makes commodities less expensive for holders of other currencies.
On Wednesday, volumes for LME copper were solid with almost 3,000 lots having changed hands, suggesting bargain hunters were coming in to support prices.
“There has been various bits of consumer buying first thing but only light. The main buyers seem to be CTAs and hedge funds trading the range,” a Singapore based trader said.
In industry news, LME shareholders decide on Wednesday whether to accept a $2.2 billion offer by the Hong Kong stock exchange for the 135-year-old institution.
A survey published by Reuters on Monday with responses from 38 of the banks, funds and industrial users entitled to vote -- more than half of the total -- showed that most of those who had reached a decision would vote yes to a sale of the exchange at an extraordinary general meeting.
