METALS-Risk Aversion Drags Copper away from 4-mth Peak

NEW YORK/LONDON, Sept 7 (Reuters) –

Copper prices backed away
from four-month highs on Tuesday, as investors reduced holdings of
riskier assets amid renewed concerns about the European banking
sector and signs of slowing growth in the euro zone.
 
"The news overnight with regards to the stress tests and
banking concerns in Europe led to a little bit of economic anxiety
and caused U.S. equities to take a hit," said Adam Klopfenstein,
senior market strategist with Lind-Waldock.
 
"Copper following equity markets to the downside."
 
Copper for December delivery HGZ0 on the COMEX metals
division of the New York Mercantile Exchange fell 2.95 cents to
close at $3.4705 per lb, after dealing between $3.42 and $3.5345,
matching a high dating back to late April.
 
On the London Metal Exchange, benchmark copper for three-month
delivery CMCU3 ended down $76 at $7,629 a tonne.
 
On Friday, copper hit a four-month high of $7,750, as
investors bet on improved demand prospects following
better-than-forecast jobs data in the United States, the world's
largest economy.

But that euphoria faded at the start of the new trading week.
 
"It's all of these fears again that have come to haunt the
market, causing the dollar to strengthen," said analyst Robin Bhar
at Credit Agricole. "The casualties have been the more risky
assets, equities and commodities including the metals."
 
World stocks pulled back from a one-month high and the euro
fell broadly after a Wall Street Journal report on recent stress
tests renewed concerns over the banking sector's health.

A firmer U.S. currency makes metals priced in dollars more
expensive for holders of other currencies.
 
Investors were also focused on data showing German
manufacturing orders unexpectedly fell in July at their steepest
rate in more than a year and an announcement by Germany's banking
association that the country's 10 biggest banks may need 105
billion euros ($134 billion) of additional capital under revamped
rules.

SUPPORTIVE FACTORS
 
Despite the economic jitters, metal prices are expected to
remain resilient, analysts and traders said.
 
"Even with these (banking) woes, I think metals generally will
hold steady, and I think the dips would be supported by consumer
restocking," Bhar said.
 
Others said support could come as U.S. President Barack Obama
pledged a $50 billion road, rail and runway infrastructure program
as a means to boost employment.
 
He also proposed to let firms write off 100 percent of their
spending on plant and equipment.

Analysts said upward pressure on some base metals may come
from a renewed push for energy efficiency in China, a leading base
metals consumer and producer.

"China is in the process of cutting production of metals
produced in polluting and energy-intensive processes," said
investment bank Fairfax in a note. "This could cause key metals
prices to rise while demand growth continues."
 
Inventory levels are also seen as a good demand indicator.
 
Latest LME data showed that on Monday, copper stocks slipped
1,400 tonnes to 395,475 tonnes, having fallen from 6-1/2 year
highs at 555,075 tonnes in mid-February.

Aluminum CMAL3 was last bid at $2,164 versus a last bid at
$2,193 on Monday. LME stocks for the metal, used in transport and
packaging, fell 4,575 tonnes, but remain near record levels at
4.41 million tonnes.
 
Nickel CMNI3 ended the day up $40 at $22,190 a tonne, while
lead CMPB3 shed $13 to close at $2,184.
 
Zinc CMZN3 edged down $7 to $2,189 a tonne and tin CMSN3
gained $50 to $20,900.
 
Metal Prices at 1820 GMT
 Metal            Last      Change  Pct Move   End 2009   Ytd Pct
                                                         move
 COMEX Cu       347.20       -2.80     -0.80     334.65      3.75
 LME Alum      2155.00        7.00     +0.33    2230.00     -3.36
 LME Cu        7610.00      -95.00     -1.23    7375.00      3.19
 LME Lead      2175.00      -22.00     -1.00    2432.00    -10.57
 LME Nickel   22085.00      -65.00     -0.29   18525.00     19.22
 LME Tin      20900.00       50.00     +0.24   16950.00     23.30
 LME Zinc      2180.00      -16.00     -0.73    2560.00    -14.84
 SHFE Alu     15725.00       30.00     +0.19   17160.00     -8.36
 SHFE Cu*     59710.00     -820.00     -1.35   59900.00     -0.32
 SHFE Zin     17960.00     -130.00     -0.72   21195.00    -15.26