By Chris Kelly and Maytaal Angel
NEW YORK/LONDON | Fri Apr 20, 2012 2:31pm EDT
(Reuters) – Copper posted its best weekly performance since late February on Friday, helped by strong first-quarter earnings results in the United States and by receding debt concerns in Europe.
Copper jumped 2 percent on Friday to be near the top of winners in the 19-commodity Thomson Reuters-Jefferies CRB Index .CRB. It gained ground alongside equities and the euro after an unexpected rise in German business sentiment bolstered investors’ appetite for risk.
The data and better-than-expected first-quarter results from fast-food chain McDonald’s (MCD.N), software giant Microsoft (MSFT.O) and top U.S. conglomerate General Electric Co (GE.N) helped London copper prices sustain a recovery from three-month lows hit earlier this week and had them hold well above the psychological $8,000 per metric ton (1.1023 tons) level for a fourth day running.
“What’s driving the turnaround is the fact that the European crisis, in the near-term, has been averted,” said Adam Sarhan, chief executive of Sarhan Capital.
“That doesn’t mean that it’s off the table, it just means that for now, it’s receding. That’s why all of these risk assets are up today.”
London Metal Exchange (LME) three-month copper rose $140 to finish at $8,190 a metric ton (1.1023 tons), nearly 4 percent away from its weekly trough on Monday at $7,885.25 — its cheapest level since late January.
In New York, the May COMEX contract firmed 7.05 cents or 1.9 percent to settle at $3.6980 per lb, after dealing between $3.6245 and $3.7125.
COMEX copper volume reached 68,600 lots in late New York trade, down sharply from last week’s record of 127,276 lots.
The risk-on rally began with an unexpected rise in German business sentiment, which offered the latest proof that the euro zone’s largest economy continued to outpace the bloc’s debt-ravaged southern states.
In response, the euro climbed to a two-week high against the U.S. dollar, and investors took on more risk after comments that the G20 would pledge to increase the IMF’s resources by more than $400 billion. <FRX/>
But analysts questioned the sustainability of the rally given the concerns over Spain’s finances, which have pushed worries about the euro zone debt crisis back to the forefront of investors’ minds.
“The Spanish issue is still a big concern to the market. And demand from China has been very slow, so I wouldn’t get too excited about the upside (for base metals),” Edward Meir, an analyst at INTL FCStone, said.
“If we get more momentum, copper could get to around $8,350/$8,400 and then it could come back down again. There is likely to be a series of lower highs for copper.”
Spanish 10-year bond yields rose above 6 percent earlier on Friday after a debt auction the previous day failed to ease longer-term doubts over the country’s fiscal health.
Open interest in copper on the LME fell to its lowest level in more than two years, suggesting a lack of conviction in the market.
Also weighing on copper, high LME cash prices are spurring Chinese firms to re-export their stocks in bonded warehouses in Shanghai, boosting supplies for nearby delivery at LME warehouses and helping to ease backwardation.
The benchmark cash-to-three-months backwardation – the premium for cash copper against three-month delivery – reached $114 per tonne on Tuesday, a level not seen since 2008.
The premium eased to $55.15 on Friday.
LME inventory data showed copper stocks rose by 1,550 tonnes to 262,700, cementing a steady rise since late March, while official Shanghai data showed copper inventories fell 4.8 percent from last Friday, but remained near multi-year highs.
Goldman Sachs estimated in a recent note that unofficial Shanghai bonded stocks were about 620,000 tonnes.
On a brighter note, Freeport-McMoRan Chief Executive Richard Adkerson said on Thursday fundamentals of the copper market remained strong, given China’s drive to invest in infrastructure projects and lower levels of inventory in the United States and Europe.
In other metals, nickel ended up $205 at $17,805 a tonne.
Nickel production in BHP Billiton’s (BHP.AX) (BLT.L) Cerro Matoso mine in Colombia rose 72 percent in the first quarter from the year earlier due to the replacement of a furnace, the company said.
Tin was untraded at the close, but bid at $21,500 from Thursday’s close of $21,375.
Refined tin output at PT Timah (TINS.JK), Indonesia’s largest tin miner, was forecast to rise by as much as 18 percent this year, an official at the company said on Thursday.
(Additional reporting by Harpreet Bhal in London; editing by Jane Baird, James Jukwey and Bob Burgdorfer)