METALS-Metals buoyed as Iraq conflict boosts commodity indexes

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Mon Jun 16, 2014 7:32am GMT
 
Reuters

* ShFE copper breaks through 100-day moving avg; hits 10-day high

* Oil prices at highest this year on Iraq supply threat

* Coming up: U.S. industrial output for May at 1315 GMT (Updates prices)

By Melanie Burton

SYDNEY, June 16 (Reuters) - London copper climbed on Monday as conflict in Iraq drove commodity indexes higher, while Shanghai copper hit a 10-day peak after breaking through a key level on charts.

The focus for metals markets has shifted to the Middle East, away from a gradually improving picture in the United States economy and China's fragile reaccelerating growth.

"People generally allocate towards commodities when geopolitical risk increases, and they tend to buy indices which tends to ripple across commodities and of course into metals," said Societe Generale analyst Mark Keenan in Singapore.

He added that if the market started to think tensions in Iraq could worsen or that fighting threatens oil supply, then there could be a "massive increase in risk premium" that could help push metals higher.

Sunni insurgents seized a mainly ethnic Turkmen city in northwestern Iraq on Sunday after heavy fighting, solidifying their grip on the north after a lightning offensive that threatens to dismember Iraq.

Oil prices have risen to the highest level this year over fears of the violence disrupting exports from the OPEC member, while the Dow Jones-UBS Commodity Index and S&P GSCI were both up around 0.4 percent.

Three-month copper on the London Metal Exchange had climbed 0.4 percent to $6,682 a tonne by 0709 GMT, extending small gains from the previous session. Copper prices have declined for the last three weeks and remain down by more than 8 percent this year.

The most-traded August copper contract on the Shanghai Futures Exchange gained 1 percent to 48,030 yuan ($7,700) a tonne. It earlier reached 48,120 yuan, its highest since June 6, after breaking above its 100-day moving average.

China's economy showed some signs of stabilising in May as the government unveiled more stimulus measures to avert a sharper slowdown, but signs of further deterioration in the property market indicate more policy support may still be needed.

China will issue foreign direct investment data on Tuesday and house price figures on Wednesday. A slowdown in property inflation is likely to stoke fears about a deepening downturn in the sector and for metals demand.

U.S. consumer sentiment fell in June as views by consumers with the lowest incomes soured, a survey released on Friday showed.

Among other metals, LME nickel is seen consolidating around current levels for the short term, said broker Triland in a note. LME nickel was up 0.8 percent at $18,210 a tonne.

"There is a realisation among traders that prices have reached a good level from which they will probably not rise much further in the near future," it said.

Hedge funds and money managers increased their bullish bets in gold futures and options last week, according to data from the Commodity Futures Trading Commission on Friday. The group, also known as managed money, cut their net long position in copper.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin               ($1 = 6.2090 Chinese Yuan Renminbi) (Reporting by Melanie Burton; Editing by Ed Davies, Joseph Radford and Anand Basu