Copper slips for third day as Fed rate hike looms

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By Zandi Shabalala

LONDON, Sept 26 – Copper fell for a third straight session on Wednesday as the dollar firmed ahead of clues on the direction of U.S. interest rates later in the day following an expected hike.

Benchmark copper on the London Metal Exchange eased 0.26 percent to $6,307 per tonne by 1050 GMT.

With the Federal Reserve widely expected to raise interest rates on Wednesday, financial markets are focused on whether signs of an acceleration in U.S. economic growth will prompt the central bank to ramp up the pace of monetary policy tightening.

“The market is waiting for any commentary that suggests a potential change to forward guidance and the impact on the dollar,” said ING commodities strategist Warren Patterson.

A stronger greenback makes dollar-denominated commodities more expensive for non-U.S. firms, a relationship used by funds to generate buy and sell signals.

But Patterson said that copper market fundamentals were “looking quite constructive” as demand from top consumer China was robust and inventories of the metal continued to fall this year.

DOLLAR: The dollar gained against a basket of its peers before an expected Federal Reserve interest rate hike priced in by investors, who are still on edge about a trade row between the United States and China.

TRADE CONCERNS: Denting demand for risky assets, such as metals, are persistent concerns over the negative impact of tit-for-tat trade tariffs between China and the United States.

CHINA PREMIUMS: Premiums for metal on the physical market in China are at $117.50 a tonne, up nearly 40 percent since August. <CU-BMPBW-SHMET>

STOCKS: LME copper inventories <MCUSTX-TOTAL> inched slightly higher to 212,925 tonnes, but were still near the lowest since January.

INVESTMENT: “Physical demand for copper is good and these prices are not going to cut it for producers to continue to invest in mining assets. We maintain the view that prices need to trend towards $7,000 per tonne towards in the long term in order to incentivise more investment,” said ING’s Patterson.

CHINA DEMAND: China’s underlying demand for refined copper remained resilient, driving global copper demand, Argonaut Securities analyst Helen Lau said.

ALCOA UNION: The union at Alcoa’s aluminium operations in the state of Western Australia said it was meeting with the company again on Wednesday to try to resolve a strike that has lasted more than six weeks, after the firm last week revised an earlier offer.

ALUMINIUM STOCKS: Stocks in LME-monitored warehouses fell below a million tonnes for the first time since March 2008 on Wednesday, at 999,925 tonnes. <MALSTX-TOTAL>

OTHER METALS: LME aluminium rose 0.7 percent to $2,086 per tonne, zinc added 1.5 percent to $2,543 a tonne, lead added 0.8 percent to $2,026 a tonne, tin eased 0.2 percent to $18,855 a tonne, while nickel rose 0.8 percent to $13,050 a tonne.

(Additional reporting by Manolo Serapio Jr.; editing by Louise Heavens)

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