Copper slips after China data, retreat in risk appetite

LONDON: Copper eased in Europe on Tuesday as Chinese data lifted expectations for monetary tightening, and as a relief rally in higher-risk assets sparked by a $1 trillion package to prevent the spread of euro zone debt issues faltered. A rise in Chinese annual inflation to an 18-month high in April showed that the government still has its work cut out to keep the world's third-largest economy from overheating.

"After very strong Chinese macro data, many people fear China will implement stricter monetary measures to deal with the overheated economy," said Commerzbank analyst Daniel Briesemann. "If China cools down its economy, then that should lead to lower imports, lower production and should definitely hurt metals prices." Elsewhere, investors are still sceptical countries like debt-laden Greece will be able to cut fiscal deficits smoothly. A reduction in risk appetite has led them to cash in gains in equities, oil, the euro and industrial metals on Tuesday.

The dollar rose against the euro on Tuesday, with the single currency giving up some gains made the previous day on news of a package to prevent the spread of the European debt crisis, as scepticism remained over Greece's ability to cut its large fiscal deficit smoothly. Oil fell towards $76 as a stronger dollar signalled lingering doubts about a resolution to Europe's debt crisis, while Chinese inflation data raised concern about potential monetary tightening measures.

China's production of refined copper rose 6.1 percent in April on the month, while output of primary aluminium inched up 0.1 percent to rack up its second-highest monthly output on improved power supplies. The European Union has imposed provisional anti-dumping duties of up to 20.6 percent on imports of aluminium wheels originating from China following a complaint of unfair competition from European manufacturers.

Three-month copper on the London Metal Exchange was trading at $6,991 a tonne at 0703 GMT compared with $7,120 at the close on Monday. Aluminium was at $2,097.25 a tonne from $2,144. Copper support at $6,980, resistance at $7,212, 14-day RSI at 31.3. Aluminium support at $2,100, resistance at $2,178, 14-day RSI at 35.6.