(Adds comment, updates prices)
By Pratima Desai
LONDON, Jan 30 (Reuters) - Copper prices dropped on
Monday as worries about the outlook for demand in top consumer
China dominated sentiment ahead of data from the country's
manufacturing sector, while a softer dollar provided some
support.
Benchmark copper on the London Metal Exchange was
down 0.7% at $9,197 a tonne at 1702 GMT. It hit a seven-month
high earlier this month as speculators piled in after China
removed its COVID-19 restrictions.
"Production of metal/copper containing goods in China,
things like cars and washing machines, rose significantly last
year. They don't need to be produced this year even if shoppers
return," said Julius Baer analyst Carsten Menke.
Neither does Menke expect any boost to metals demand from
the property sector. "China's population is shrinking, demand
for property is declining structurally, why would the government
use property to stimulate growth?"
Clues to demand prospects will come from surveys of
purchasing managers in China's manufacturing sector this week.
A lower U.S. currency makes dollar-priced metals cheaper for
holders of other currencies, which could boost demand. The future direction of interest and currency rates could be
determined by earnings reports from Apple , Alphabet and Amazon and a meeting of the Federal
Reserve this week.
"We have long argued that the Fed will need to take a rate
pause at some point, but we think it will not do so at this
particular meeting," Edward Meir, analyst at ED&F Man Capital
Markets, said.
Technical support for copper is around $9,025 where a
Fibonacci retracement level and the 21-day moving average meet.
Meanwhile, the zinc market is focused on dwindling stocks in
LME approved warehouses , which at 17,425 tonnes are
at their lowest since 1989 and large holdings of zinc warrants
and cash contracts .
Concern about availability on the LME has created a premium
or backwardation for the cash over the three-month zinc
contracts , which was last trading at $26 a tonne.
Three-month zinc was up 0.7% at $3,438 a tonne.
In other metals, aluminium was down 1.5% at $2,588 a
tonne, lead fell 1.7% to $2,145, tin ceded 3.6%
to $29,740 and nickel was up 1.5% at $29,350.
(Reporting by Pratima Desai; editing by Kirsten Donovan and
Barbara Lewis)
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