KUALA LUMPUR, Jan 4 (Reuters) - London copper fell on Wednesday, snapping two days of gains, as worries that the financial crisis in the euro zone will slow global economic growth overrode optimism from upbeat U.S. economic data.
While U.S. manufacturing grew at its fastest pace in six months in December, investors fear euro zone financial troubles will spread, leading to slower demand growth for the industrial metal.
"There's too much uncertainty," said Koun-Ken Lee, commodities strategist at Standard Chartered in Singapore.
"No one knows if Europe will blow up. As people come back to the market, the volatility will return."
Three-month copper on the London Metal Exchange dropped 1.6 percent to $7,665 a tonne by 0705 GMT, reversing gains from the previous session. Prices tumbled 21 percent in 2011, the first drop in three years.
The most-traded March copper contract on the Shanghai Futures Exchange climbed 0.78 percent to 55,790 yuan ($8,900) a tonne in the first day of trading for this year.
LME copper had risen on the first trading day of 2012 with a
2.5 percent rally on Tuesday.
LME copper will rise to $7,887 a tonne, as it has cleared resistance at $7,689, according to Reuters technical analyst Wang Tao.
Even after data that showed German unemployment fell more than expected in December, the focus remains on the euro zone's inability to produce a comprehensive plan to pull the area out of its two-year-old debt crisis.
Germany's jobless rate was at 6.8 percent in December, the lowest since the unification of Germany two decades ago.
France's Nicolas Sarkozy will meet German Chancellor Angela Merkel in Berlin on Jan. 9 for talks that are likely to centre on new rules to enforce budget discipline across the European Union. Finance ministers from the EU's 27 members will meet on Jan. 23 before their leaders hold a summit a week later.
On the fundamental side, Rio Tinto Alcan is prepared to operate its Alma aluminum smelter in eastern Canada at one-third capacity during a lockout of unionized employees that began Jan. 1, a company spokesman said on Tuesday.
Peru's mining ministry said on Tuesday output of copper rose in November from the same month a year earlier, but that production of most metals slipped.
"We're still bullish on commodities because the demand-supply picture is different from 2008," said Standard Chartered's Lee. The bank forecasts LME copper averaging $8,000 in the first quarter.
"It's much tighter in terms of supply now."
Base metals prices at 0705 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7665.00 -125.00 -1.60 0.86
SHFE CU FUT MAR2 55790 430 +0.78 2.90
LME Alum 2051.00 -25.00 -1.20 1.53
SHFE AL FUT MAR2 15915 70 +0.44 0.38
HG COPPER MAR2 348.35 -4.50 -1.28 1.38
LME Zinc 1862.00 -16.00 -0.85 0.92
SHFE ZN FUT MAR2 14775 -20 -0.14 1.37
LME Nickel 18700.00 -200.00 -1.06 0.27
LME Lead 2062.00 -38.00 -1.81 1.38
SHFE PB FUT 15255.00 5.00 +0.03 1.26
LME Tin 19300.00 -695.00 -3.48 0.52
LME/Shanghai arb 655
Shanghai and COMEX contracts show most active months
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
($1 = 6.2940 Chinese yuan)