SHANGHAI, May 18 (Reuters) - London copper peeked above four-month lows on Friday on bargain-hunting and signs that Greeks are warming up to pro-austerity parties, allaying some fears their country could leave the euro zone.
But worries over Spain's finances and reports of Chinese copper inflows into the LME will likely cap gains in the session.
Three-month copper on the London Metal Exchange had inched up 0.1 percent to $7,656.75 a tonne by 0138 GMT, after closing almost flat in the prior session.
The most-active August copper contract on the Shanghai Futures Exchange fell 0.9 percent to 55,220 yuan ($8,700) a tonne, after rising 1.9 percent on Thursday – much more than London futures did on the same day.
Greek voters are returning to the establishment parties that negotiated its bailout, a poll showed on Thursday, ahead of a snap Greek election next month, which many feared would empower anti-austerity leftists and lead to the country quitting the euro.
Also, euro zone banks are in better shape than before the financial crisis began and those in Germany are equipped to cope with Greece taking a turn for the worse, a Bundesbank board member told Reuters in an interview.
But borrowing costs of Spain, another potential source of debt-contagion in the region, spiked at a bond auction on Thursday. Shares of its troubled lender Bankia dived while 16 other banks suffered a credit ratings cut. Official data also confirmed Spain was back in recession.
Adding to investor caution was data from the other side of the Atlantic. New claims for U.S. jobless benefits last week held at levels suggesting sluggish growth in hiring and factory activity in the mid-Atlantic region contracted in May, worrisome signs for a still-fragile economic recovery.
Traders said China's smelters and merchants were delivering around 110,000 tonnes of refined copper cathode to London Metal Exchange (LME) warehouses in South Korea, in a rare hefty outflow of inventories that could pressure copper prices.
The exports come just two weeks after the trading unit of Jiangxi Copper Co Ltd , China's top producer, said a group of copper smelters as well as trading firms would export refined copper cathodes to LME to help ease tight global supplies and trim near-record stockpiles at home.
Asian shares fell steeply on signs of growing instability among Spanish banks and political turmoil in Greece, with the latest sluggish economic data from the U.S. adding to the list of risks for investors.
The safe-haven yen posted sharp gains against the euro and dollar on Thursday on the same concerns.
0200 China House prices m/m May
0930 U.S. CFTC commitment of traders data
Base metals prices at 0138 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7656.75 7.75 +0.10 0.75
SHFE CU FUT AUG2 55220 -510 -0.92 -0.74
LME Alum 2050.00 -4.00 -0.19 1.49
SHFE AL FUT AUG2 16030 -10 -0.06 1.20
HG COPPER JUL2 346.90 -1.00 -0.29 0.96
LME Zinc 1904.00 4.00 +0.21 3.20
SHFE ZN FUT AUG2 14880 -95 -0.63 0.57
LME Nickel 17051.00 -144.00 -0.84 -8.87
LME Lead 1944.00 17.00 +0.88 -4.47
SHFE PB FUT 15110 -160 -1.05 -1.18
LME Tin 19200.00 0.00 +0.00 0.00
LME/Shanghai arb 1449
Shanghai and COMEX contracts show most active months
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
($1 = 6.3252 Chinese yuan)