June 16, 2020 / 12:46 PM / a month ago

METALS-Copper advances as latest Fed stimulus sparks buying spree

* Copper support at $5,660, 200-day moving average

* Premium for cash over 3-month tin contract surges (Updates prices)

By Pratima Desai

LONDON, June 16 (Reuters) - Copper prices climbed on Tuesday as the Federal Reserve's latest move to provide further support for the U.S. economy helped to boost sentiment, but gains were capped by worries about prospects for demand in top consumer China.

Benchmark copper on the London Metal Exchange was up 0.3% at $5,722 a tonne at 1604 GMT from an earlier high of $5,836 a tonne. Prices of the metal used to make products widely used in the power and construction industries last week rose to $5,928 a tonne, the highest since Jan. 24 and a 35% increase since the middle of March.

"Central bank stimulus has been behind the rallies in all markets considered to be risky," a copper trader said. "But for these levels to hold or for a push beyond $6,000, we need solid evidence that Chinese demand is going to hold up."

SUPPORT: The Federal Reserve on Monday launched its Main Street Lending Program, the most complex programme undertaken yet to help keep the backbone of the economy from buckling under the strains of the coronavirus pandemic.

DOLLAR: Fed stimulus has weighed on the U.S. currency, which when it falls makes dollar-denominated commodities cheaper for buyers in other currencies. This relationship is used by funds to generate buy and signals from numerical models.

GROWTH: China's factories stepped up production for a second straight month in May, although the weaker-than-expected gain suggested the recovery remained fragile.

TECHNICALS: Major support for copper prices is at $5,660 where the 200-day moving average currently sits.

TIN SPREADS: Historically low stocks of tin MSNSTX-TOTAL in LME registered warehouses have fuelled worries about nearby supplies on the exchange.

That pushed the premium for the cash over the three-month tin contract to $372.5 on Monday, the highest since August 2015. It was last at $215 a tonne MSN0-3.

Three-month tin rose 0.2% to $16,875 a tonne.

OTHER METALS: Aluminium was up 1.2% at $1,596, zinc gained 0.8% to $1,999, lead added 1.5% to $1,764 and nickel climbed 2.1% to $13,005 a tonne. (Reporting by Mai Nguyen; Editing by Jane Merriman and Louise Heavens)

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