Copper ticks higher as Fed rate hike bets fade

By Reuters News

Oct 5 (Reuters) - Copper rose for a second straight session on Monday, tracking equity markets higher and as fading prospects for a US Federal Reserve rate hike outweighed pressure from a strong dollar.

Benchmark three-month copper on the London Metal Exchange was up 0.6% at $14,346 a metric ton as of 0951 GMT. The metal hit a record high of $14,875 on September 10 on concerns of tight supplies outside the US before losing ground last week.

"Copper is helped by [an] uptick in equities as US Fed rate hike possibilities in October are dimming," said Sandeep Daga, head of research at Metal Intelligence Centre.

The pan-European STOXX 600 .STOXX gained 0.2% after hitting a four-month low last week as global bond yields surged on inflation, higher corporate bond issuance and worsening fiscal outlooks. Japan's Nikkei share average meanwhile posted a three-month closing high on Monday.

Odds of an October US rate hike fell after weaker-than-expected US jobs data last week. Rate traders are now pricing in an 18% chance of a rate hike at this month's Fed meeting, down from 71% a week ago, according to the CME's FedWatch tool.

Higher interest rates can dampen economic activity and weigh on demand for growth-dependent industrial metals like copper.

The dollar rose to a near-17-month high against the euro. A stronger dollar can weigh on greenback-denominated metals by making them more expensive for buyers using other currencies.

The market is awaiting the return of top metals consumer China on Thursday to gauge fourth-quarter buying interest. Chinese copper stocks are thin and smelter maintenance suspensions lined up, but domestic demand also appeared weak, Daga said.

The cash LME copper contract was trading at a nearly $63 a ton premium over the three-month forward , up from $53.50 on Friday, indicating tightening near-term supply.

Aluminium touched its lowest since July 3 before rebounding to trade up 0.4% at $3,111.50 a ton, poised to snap a five-day losing streak.

Zinc dipped 0.1% to $3,708, lead added 0.8% to $1,865.50, nickel nudged up 0.5% to $15,700 and tin gained 0.4% to $54,190.

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