Copper edges lower ahead of US data

Copper edged lower on Friday as investors cut risk ahead of a slew of economic data from the world's largest economy, the US, while markets shrugged off well-signposted tightening measures from top consumer China.

Three-month copper on the London Metal Exchange traded at $9,571 a tonne by 1110 GMT from $9,620 at Thursday's close. The metal used in power and construction hit a record high of $9,754 a tonne on Jan. 4.

It was little changed after top consumer China raised banks' required reserves again, a milder form of monetary policy tightening following an interest rate rise in December.

"It's pretty much expected. Certainly since the beginning of the new year, the market's expectation was further tightening," Credit Agricole analyst Robin Bhar said. "On the basis of that, the market reaction is a reasonable one."

In other news, China's State Reserves Bureau plans to spin off its commercial activities from its strategic operations, which could lead to buying and selling commodities with an aim to ensure macroeconomic stability.

Analysts have cited a softening from Asia in the near term as the Chinese New Year, at the start of February, approaches.

"China has its Lunar new year, it's going to be very quiet," VTB Capital analyst Andrey Kryuchenkov said.

After a string of optimistic data from the US in recent weeks, Thursday's data showed a surprise jump in jobless claims, showing the economic recovery still faces headwinds.

More data from the United States, the world's largest economy, is due later on Friday. Among the numbers expected are retails sales at 1330 and industrial output at 1415 GMT.

"There's a slate of US data coming out ... so they (investors) are cutting risk," Bhar said.

Investors will also watch out for inflation and data from China due next week.

FALLING STOCKS

The outlook for copper remains positive due to expectations of a supply deficit this year.

Stocks of copper in London Metal Exchange fell 1,125 tonnes to 376,225 tonnes.

Since Dec 9, they have risen about 30,000 tonnes, raising some concerns over demand. Looking further back, however, analysts underlined that stocks were down 30 per cent since they hit a 6-1/2 year high in mid-February 2010.

As stocks have climbed, recent worries about nearby supply have eased, and so too, for now, has the premium for cash copper over the three-month contract at $7.50 a tonne.

Supply worries had pushed the backwardation to around $70 a tonne in mid-December.

Aluminium stocks, on the other hand, continued a recent rise and last reached 4,435,000 tonnes. Aluminium traded at $2,483.25 from $2,482 a tonne.

The disruption of Australian coal exports is triggering a surge in production costs amidst power rationing for Chinese aluminum smelters," Credit Suisse said in a research note.

"Floods are also directly affecting production in Australia, with the country's biggest aluminum smelters declaring force majeure on their deliveries. With demand for metals still robust, we think prices will continue their uptrend," it said.

Rio Tinto declared force majeure on supplies of aluminium from its Boyne Island smelting division in Australia's Queensland state, it said Thursday.

Among other metals, zinc traded at $2,447 from $2,462 a tonne and battery material lead was at $2,633 from $2,635 a tonne. Tin traded at $26,775 at $26,850 a tonne. Nickel was at $25,350 from $25,550 a tonne.