(Updates prices and paragraph on zinc premiums)
By Pratima Desai
LONDON, Feb 6 (Reuters) - Copper prices dropped to
four-week lows on Monday as doubts about a recovery in demand,
tensions between the United States and China and a stronger
dollar spurred a sell-off.
Benchmark copper on the London Metal Exchange (LME)
was down 1.2% at $8,869 a tonne at 1705 GMT from an earlier
$8,808, the lowest since Jan. 10. Copper is down 7% since Jan.
18, when prices hit seven-month highs of $9,550.5.
One spotlight is on top consumer China, where economic
growth last year slumped to one of its weakest levels in nearly
half a century because of COVID restrictions and a property
market slump.
"There are doubts about demand recovery in China after the
growth data. Manufacturing activity is still shrinking," one
metals trader said. "The dollar is also having a big influence
on the base (metals) complex."
The dollar was boosted by expectations that the U.S. Federal
Reserve will lift benchmark interest rates above 5% after data
showing the labour market remains strong. When the U.S. currency rises, it makes dollar-denominated
metals more expensive for holders of other currencies.
Tensions between the United States and China rose after the
U.S. military on Saturday shot down what it believed was a
Chinese surveillance balloon, a response China described as an
"obvious overreaction".
"We are not sure what the fallout will be with the
China/U.S. confrontation over the balloon, but we suspect both
sides are not going to escalate things and try to get their
relationship back on track," said Marex analyst Edward Meir.
Elsewhere, metals markets are focused on historically low
inventories in LME-approved warehouses, though discounts for
cash metal over the three-month contracts suggest traders are
not concerned about availability on the LME market.
The exception is zinc , where there is a premium
for cash metal over the three-month contract. There is also a
premium for buying zinc tomorrow over prices for the following
day .
However, three-month zinc was down 3.4% at $3,130 a tonne.
In other metals, aluminium fell 1.4% to $2,533, lead gained 0.5% to $2,110, tin slumped by 5% to
$26,970 and nickel fell 4.8% to $27,225.
(Reporting by Pratima Desai
Editing by Mark Potter, Jane Merriman and David Goodman
)
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