London copper steadied on Thursday, recovering from a one-month low hit in the prior session as investor sentiment stabilized, but concerns the European debt crisis could yet deepen signaled the bounce could be brief.
Three-month copper on the London Metal Exchange traded at $7,434.75 a tonne by 0251 GMT, down 0.15 percent from the previous session, when it hit its lowest in one month, at $7,344.25 a tonne.
Copper has dropped 15 percent from the year's peak hit in February to trade down around 2 percent for the year.
The most-traded November copper contract on the Shanghai Futures Exchange traded up 0.8 percent, at 54,050 yuan ($8,500) a tonne.
"Copper looked reasonably well set for a move higher, with the market positioned quite short, an increasing conviction that Chinese demand should pick up in the second half as well as some support from U.S. construction," said Hong Kong-based analyst James Luke of China International Capital Corp (CICC).
"The caveat of course being any further deterioration in Europe ... With the market on downside watch over Europe, it is quite difficult to see strong conviction emerging and so we expect a volatile and broadly rangebound summer."
Asian shares steadied on Thursday after bouncing from recent lows as hopes grew for more U.S. stimulus to support growth and new European policy measures to keep the euro zone's debt crisis from deepening further, but sentiment was fragile.
The euro, however, inched lower, giving back some of its gains from a short-covering rally the previous day, its outlook clouded by persistent worries about Spain's debt woes.
European Central Bank Governing Council member Ewald Nowotny said there are arguments for giving Europe's permanent rescue fund a banking license which helped to boost the euro and earlier underpin metals.
Also, data showing new U.S. home sales in June posted their biggest drop in more than a year reinforced views the Federal Reserve would consider more easing steps to underpin a delicate U.S. recovery.
A softer dollar makes commodities cheaper for holders of other currencies.
There are fresh signs of bearish sentiment in China, the world's top copper consumer, Standard Bank said in a research note, as the structure of the ShFE forward copper curve suggests an influx of fresh short positions.
"Recent changes in the forward curve and open interest suggest that short positions are instead being rolled forward and indeed have been added to," it said.
Shanghai copper has resumed a backwarded structure this week, with the third month contract trading at a discount of 260 yuan against the rolling front-month contract.
In other metals, a sharp drop in tin prices has spurred a pickup in China purchases, RBC Capital said in a note.
"We note with interest that physical tin prices in China are nearly $1,000 higher than they are on the LME, and would not be surprised to see some opportunistic re-stocking by clever consumers in anticipation of higher prices before year end."
Tin, one of the LME's smallest and most illiquid contracts, hit a ten-month trough of $17,125 a tonne on Wednesday.
Base metals prices at 0251 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7434.75 -11.25 -0.15 -2.17
SHFE CU FUT NOV2 54050 420 +0.78 -2.37
HG COPPER SEP2 337.50 0.05 +0.01 -1.78
LME Alum 1876.50 6.50 +0.35 -7.10
SHFE AL FUT NOV2 15340 95 +0.62 -3.19
LME Zinc 1807.00 6.00 +0.33 -2.06
SHFE ZN FUT NOV2 14455 75 +0.52 -2.30
LME Nickel 15840.00 -60.00 -0.38 -15.34
LME Lead 1863.00 8.00 +0.43 -8.45
SHFE PB FUT 14790.00 85.00 +0.58 -3.24
LME Tin 17349.00 4.00 +0.02 -9.64
LME/Shanghai arb^ 1257
Shanghai and COMEX contracts show most active months
^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month
($1 = 6.3885 Chinese yuan)
($1 = 6.3885 Chinese yuan)