Copper buoyed by low stocks

LONDON, Feb 13 (Reuters): Copper prices extended gains on Tuesday, continuing a recovery from last week's 3.7 per cent decline thanks to lower inventories while investors await US inflation data for a steer on hopes for cuts to interest rates.

Three-month copper CMCU3 on the London Metal Exchange (LME) was up 0.8 per cent at $8,298 a metric ton by 1106 GMT. The metal hit a three-month low of $8,127 on Feb. 9.

While China takes a back seat during the Lunar New Year holidays, a big driver for copper and other industrial metals is today's US inflation data, which could provide an indication when the Federal Reserve might start easing monetary policy, said ING commodities strategist Ewa Manthey.

High US interest rates support the US currency, which makes dollar-priced metals more expensive for buyers using other currencies and also weakens investor sentiment towards growth-dependent commodities.

Copper, widely used in power and construction, is down 3.6 per cent this month on concerns about demand from top consumer China and its property sector in particular.

"We believe the short-term outlook remains bearish to neutral for copper demand and do not foresee a substantial recovery in prices before the second quarter, which should mark the starting point for Fed rate cuts," Manthey said. On the technical front, copper broke through resistance from its 100-day moving average at $8,294. The next resistance is at 200-day moving average at $8,339.6.

LME daily data showed that copper stocks in LME-registered warehouses hit the lowest level since September after 850 tons of outflows. Meanwhile, lead stocks rose further to a six-year high while zinc stocks climbed to their highest in two and a half years.

LME aluminium gained 0.5 per cent to $2,238.5 a tonne, zinc was up 0.2 per cent at $2,324, lead fell 0.3 per cent to $2,018.5, tin edged up by 0.1 per cent to $27,330 and nickel was up 0.6 per cent at $16,130.