January 4, 2019 / 12:06 PM / 7 months ago

METALS-Copper rebounds as China and U.S. prepare for trade talks

(Updates with closing prices, U.S. employment data)

By Peter Hobson

LONDON, Jan 4 (Reuters) - Copper prices rallied on Friday from the previous day’s 18-month low after China cut bank reserve requirements and announced new trade talks with the United States.

The moves sparked optimism that the world’s top commodities consumer can prevent a rapid economic deceleration, lifting other industrial metals and Chinese, European and U.S. stock markets.

Benchmark copper on the London Metal Exchange (LME) closed up 3.2 percent at $5,918 a tonne, its biggest one-day gain since September.

But the metal used in power and construction was down 1.3 percent over the week after a warning by Apple of weaker than expected iPhone sales in China underlined concerns about the Chinese economy.

Copper prices fell 18 percent last year.

“China’s easing (of reserve requirements) has managed to turn round the downtrend,” said Societe Generale analyst Robin Bhar. “But all this could retrace next week, depending on the trade talks. If the trade dispute escalates, this rally will be short-lived.”

However, Bhar said he expected industrial metals prices to rise by 5-10 percent this year because any weakness in demand would 0be offset by tight supply.

CHINA STIMULUS: China’s central bank cut the amount of cash that banks have to hold as reserves for the fifth time in a year, freeing up $116 billion for new lending.

TRADE TALKS: China and the United States will hold trade talks in Beijing on Jan. 7-8.

CHINA ECONOMY: Chinese factory activity contracted for the first time in 19 months in December, though data on Friday showed the services sector continued to expand.

U.S. ECONOMY: Robust employment data, meanwhile, underscored the strength of the U.S. economy.

STOCKS: Copper, zinc, aluminium and lead stocks in LME-registered warehouses remain near decade-lows. Tin inventories are close to the lowest on record and nickel stocks are the least in five years. <0#LMESTX-TOTAL>

Inventories of copper, aluminium and zinc in Shanghai Futures Exchange warehouses are also down sharply from highs last year.

WARRANTS: Exacerbating fears of a supply squeeze, LME data showed single entities hold significant proportions of aluminium, nickel and zinc warrants. <0#LME-WHL>

CHINA PREMIUM: In a sign of a tighter Chinese market, Chinese Yangshan copper import premiums, at $72.50, have begun to rise after halving late last year. SMM-CUYP-CN

OTHER METALS: LME aluminium ended up 1.6 percent at $1,865 a tonne, zinc rose 2.5 percent to $2,438, lead climbed 0.9 percent to $1,950 and nickel gained 2.2 percent to $11,110. Tin closed down 0.1 percent at $19,550.

All but lead and zinc were up this week.

Additional reporting by Naveen Thukrall; Editing by David Goodman and Mark Potter

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