PHOTO
Copper bounced from five-month lows on Monday as the focus shifted to demand potential after a sell-off triggered by funds and traders reversing bets on higher prices.
Benchmark copper on the London Metal Exchange (LME) traded 0.7% up at $9,829 a metric ton in official rings, having earlier slipped to the lowest level since May 2 at $9,741.
Traders expect further buying on Tuesday when China returns from the Dragon Boat Festival holiday.
The sell-off had started on Friday after U.S. data showed strong jobs growth in May, suggesting that the U.S. Federal Reserve might not cut interest rates as soon as previously expected.
This prompted the U.S. currency to bounce, making dollar-priced metals more for expensive for holders of other currencies in a relationship used by funds to generate buy and sell signals from numerical models.
"Such an outsized reaction can only happen in the futures markets if traders square their positions based on some sort of automated trading," said Julius Baer analyst Carsten Menke.
"The fundamental backdrop looks sound, but we need to see what happens whether this global manufacturing recovery everybody is expecting - based on PMIs - actually materialises."
Surveys of purchasing managers in top consumer China show factory activity picking up, particularly at smaller companies.
However, worries about Chinese demand remain owing to rising inventories in warehouses monitored by the Shanghai Futures Exchange (ShFE) . Copper stocks have reached four-year highs of 336,964 tons, compared with about 30,000 tons in January.
Also indicating weakness in the Chinese market is the Yangshan copper premium , which reflects the country's demand for copper imports. The figure has been at or below zero since May.
Traders were also awaiting loans and social financing data for clues on Chinese demand prospects.
In other metals, aluminium was down 0.2% at $2,574 a ton, zinc climbed 1.7% to $2,815, lead slipped 0.6% to $2,187, tin was up 1.6% at $31,950 and nickel gained 0.4% to $18,100.
(Reporting by Pratima Desai Editing by David Goodman)