NEW YORK/LONDON, March 8 (Reuters) - Copper dipped into negative territory Monday afternoon, as a lack of liquidity and follow-through fund momentum reversed earlier gains and left prices of the red metal vulnerable to further downside pressure.
Copper for May delivery HGK0 on the New York Mercantile Exchange's COMEX division shed 0.70 cent to finish at $3.4105 per lb, near the bottom end of its $3.3855 to $3.465 session range.
On the London Metal Exchange (LME), copper CMCU3 closed at $7,470 a tonne from $7,545 a tonne on Friday. The metal used in power and construction earlier hit a session high of $7,629.75 a tonne.
"The market overnight, rallied back above $7,600 on the back of sentiment generated by what was going on in Euroland and China ... the jobs data was good as well," said Alex Heath, head of base metals at RBC Capital Markets.
"This afternoon, we're not seeing any flows." "The markets are thin," he added. "It is very much a watch-and-wait scenario.
" Volumes on the LME's Select electronic trading system for the three-month copper contract were at 9,394 tonnes at 12:10 p.m. EST (1710 GMT), compared with last Monday's 18,854 tonnes.
Economically sensitive copper began the new trading week on solid footing, extending a bounce from upbeat data on Friday, showing U.S. employers cut fewer jobs than expected during February. The report supported views that the world's largest economy could be on the path to higher growth.
But that momentum quickly faded as the session wore on, leading to increased technical pressures, analysts said.
"A lot of investment funds have been flowing into commodities," Steve Platt, futures analyst with Archer Financial Services in Chicago said, adding a rise in COMEX copper to $3.55 (per lb) could easily result in a setback down to $3.25.
Also capping losses, Premier Wen Jiabao said last week China, the world's largest consumer of industrial metals, will seek to heal social rifts and spur home-driven growth with more public welfare and rural spending.
Stocks of copper in LME warehouses have fallen 9,000 tonnes since March 2 to 541,575 tonnes. Traders are also watching canceled warrants -- material already tagged for delivery – for signs of stronger demand.
Copper canceled warrants are up at 29,625 tonnes from 4,600 tonnes on Feb. 1.
Aluminum stocks fell 6,225 tonnes to above 4.53 million tonnes. They are down 101,850 since hitting a record high above 4.64 million tonnes on Jan. 21 this year.
The metal used in transport and packaging is also supported by financing deals which are estimated to have tied up a significant proportion of LME stocks.
As with copper, traders are also watching canceled aluminum warrants, which are at 291,800 tonnes from 215,250 tonnes at the start of the year.
Three-month aluminum CMAL3 ended at $2,231 a tonne from $2,230 at the close on Friday. Earlier it hit $2,265, its highest since Jan. 21.
Zinc CMZN3 touched $2,410.75 a tonne, its highest since Jan. 22. It closed at $2,370 from $2,349 and battery material lead CMPB3 ended at $2,257.50 from $2,230.
Tin CMSN3 closed at $17,300 from $17,400 and stainless ingredient nickel CMNI3 at $22,300 from $22,395. Nickel has gained about 30 percent since Feb. 5.
"(There are) positive reports coming from the market since the start of the year regarding demand recovery from the main end-use market for nickel, stainless steel," Macquarie said in a note. "The market is also now in deficit."