June 23 (Reuters) - Shanghai copper rallied to its highest in four months on Monday, buttressed by tight supply and solid improvement in China's private sector, while London copper hit a three-week peak.
Activity in China's factory sector expanded in June for the first time in six months as new orders surged, a preliminary HSBC survey showed on Monday.
"The stimulus measures of the past three months are really working and having a positive impact on the overall economy," said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong.
Inflation concerns, driven by higher oil prices, were also supporting prices, Lau said. But further gains faced headwinds, given seasonally slower demand from copper cable and rod manufacturers in the next few months, she added.
Three-month copper on the London Metal Exchangehad climbed 0.7 percent to $6,870 a tonne by 0135 GMT, after hitting $6,872 a tonne, its highest since June 3.
The most-traded August copper contract on the Shanghai Futures Exchangerallied 2.2 percent to 49,490 yuan
($8,000) a tonne. It earlier climbed 2.3 pct to 49,580 yuan a tonne, the strongest since Feb. 26.
The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose to 50.8 in June from May's final reading of 49.4, beating a Reuters poll forecast of 49.7 and creeping above the 50-point level that separates growth in activity from contraction.
Meanwhile, UOB-Kay Hian's Lau said an investigation into suspected fraud at a Chinese port has caused banks to take longer to approve loans for copper imports.
"Certainly China will reduce imports because of this financing issue and it will also take a longer time to get cleared, so this will create some short term shortage in the spot market," she said.
Shaken by a fraud investigation into metal financing in the world's seventh-busiest port, banks and trading houses have been made painfully aware of the risks they face storing commodities in China's sprawling warehouse sector.
Suggesting further gains in the near term, ShFE and LME copper punched through their 200-day moving averages, a key buy signal for chart-following strategies.
Hedge funds and money managers cut their bullish bets to switch the copper market to a net short position in the week to June 17, according to data from the Commodity Futures Trading Commission on Friday.
Across other metals, buying interest for zinc may be waning on the approach to the $2,200, said broker Triland in a note, after LME zincscaled a 16-month peak on Friday.
"The market is not overbought on the RSI (relative strength index) measurement however, so further gains are still likely in the short term. We're not convinced the current physical market is strong enough to justify spread tightness, but overall the picture looks generally positive," it said.
Activity in China's factory sector expanded in June for the first time in six months as new orders surged, a preliminary HSBC survey showed on Monday.
"The stimulus measures of the past three months are really working and having a positive impact on the overall economy," said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong.
Inflation concerns, driven by higher oil prices, were also supporting prices, Lau said. But further gains faced headwinds, given seasonally slower demand from copper cable and rod manufacturers in the next few months, she added.
Three-month copper on the London Metal Exchange
The most-traded August copper contract on the Shanghai Futures Exchange
($8,000) a tonne. It earlier climbed 2.3 pct to 49,580 yuan a tonne, the strongest since Feb. 26.
The HSBC/Markit Flash China Manufacturing Purchasing Managers' Index rose to 50.8 in June from May's final reading of 49.4, beating a Reuters poll forecast of 49.7 and creeping above the 50-point level that separates growth in activity from contraction.
Meanwhile, UOB-Kay Hian's Lau said an investigation into suspected fraud at a Chinese port has caused banks to take longer to approve loans for copper imports.
"Certainly China will reduce imports because of this financing issue and it will also take a longer time to get cleared, so this will create some short term shortage in the spot market," she said.
Shaken by a fraud investigation into metal financing in the world's seventh-busiest port, banks and trading houses have been made painfully aware of the risks they face storing commodities in China's sprawling warehouse sector.
Suggesting further gains in the near term, ShFE and LME copper punched through their 200-day moving averages, a key buy signal for chart-following strategies.
Hedge funds and money managers cut their bullish bets to switch the copper market to a net short position in the week to June 17, according to data from the Commodity Futures Trading Commission on Friday.
Across other metals, buying interest for zinc may be waning on the approach to the $2,200, said broker Triland in a note, after LME zinc
"The market is not overbought on the RSI (relative strength index) measurement however, so further gains are still likely in the short term. We're not convinced the current physical market is strong enough to justify spread tightness, but overall the picture looks generally positive," it said.
