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Copper gains as U.S. inflation data points to fewer rate rises

Kitco News

LONDON, Nov 10 (Reuters) - Prices of copper and other industrial metals rose sharply on Thursday after U.S. data showed that underlying inflation appeared to have peaked, which may allow the Federal Reserve to stop raising interest rates sooner.

A lower peak in U.S. interest rates would help metals because higher rates restrain economic activity and boost the dollar, making dollar-priced commodities more expensive for buyers with other currencies.

The dollar plunged after the figures showed U.S consumer prices increased 7.7% year-on-year in October. Stock markets also gained. Benchmark copper on the London Metal Exchange (LME) was up 1.9% at $8,262 a tonne at 1701 GMT, reversing losses from earlier in the session.

"This gives the Fed its excuse to start conditioning markets for a turn in policy. That could be a lot quicker now," said WisdomTree analyst Nitesh Shah.

However, more data would be needed to confirm that inflation really has peaked, he said.

Copper prices are still down 24% from a high in March because rising interest rates and strict COVID-19 controls in China have stifled economic activity.

Fears persist of weak demand China, the biggest metals consumer, which is again grappling with a surge of infections.

Millions of residents of China's southern manufacturing hub of Guangzhou are being required to take COVID-19 tests.

Data showed that in October factory gate prices dropped and auto sales rose at their slowest pace in five months. Analysts expected new yuan loans to have slumped in October and China's usual year-end export surge is in doubt.

Despite a fall in copper inventories in LME-registered warehouses, the premium for cash copper over the three-month LME contract has fallen to around $10-15 a tonne from more than $100 last month, suggesting ample supply. LME aluminium was up 0.7% at $2,335 a tonne, zinc rose 0.9% to $2,878, nickel gained 6% to $26,165, lead added 0.6% to $2,089.50 and tin was up 1.8% at $20,170.

(Reporting by Peter Hobson, Additional reporting by Mai Nguyen in Hanoi; editing by Uttaresh.V and Krishna Chandra Eluri)

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