London Metal Exchange (LME) copper futures fell more than 1 percent on Friday on concerns about falling demand after weak US economic data released the previous day. Traders saw limited direct impact on base metals from the assassination of Pakistani opposition leader Benazir Bhutto, but were worried that copper prices might be influenced in the days ahead by volatility in other markets.
Benchmark copper for delivery in three months on the London Metal Exchange was down $50 at $6,830 per tonne by the end of the session, after earlier trading as low as $6,761. Copper has lost more than 12 percent since the start of November as investors fear the global credit crunch and slowing US growth may hit demand for the metal, which is commonly used in house building and electrical items.
Weak US durable goods orders for November, released on Thursday, fuelled concern over the resilience of the US economy to the steep housing slump, while jobless claims also jumped last week, in a possible sign of mounting pressure on the labour market.
Friday's data releases, which showed US manufacturing activity during December, expanded more quickly than expected and new home sales in November falling to their slowest pace in more than 12 years did not immediately move base metals prices. "Yesterday's economic numbers didn't really help matters as they all came in worse than expected," William Adams at Basemetals.com said. "Generally, prices had a run up after last Friday's close and that extra price gain has been worked off, sold into," he said.
Investors expect the US Federal Reserve to respond to the economic slowdown by lowering borrowing costs again at its next policy meeting on January 29-30. European stocks slipped slightly, falling for the first time in five sessions, on worries about the credit crunch and the geopolitical outlook. The FTSEurofirst index was down 0.2 percent by 1700 GMT. Investors fear that Bhutto's killing on Thursday at a political rally in Rawalpindi could spark instability in the region and civil unrest within Pakistan.
"We are not sure whether base metals will be influenced more by falling shares in the stock market or rising gold and oil prices. Liquidity in commodities will be affected," a trader at a futures broker said. The Shanghai Futures Exchange will close from December 29 to January 1 for the year-end holiday. Trading will resume on January 2.
Uncertainties on the global financial markets have pushed Chinese investors to lighten holdings and adopt a wait-and-see position. Copper inventories monitored by the Shanghai exchange fell 125 tonnes, or half a percent, to 25,597 tonnes in the week ended on Thursday, the seventh weekly drop in a row. Zinc inventories in Shanghai rose 31 percent to 54,404 tonnes the week.
Aluminium was up $11 at $2,420 per tonne, while zinc was down $45 at $2,425 per tonne. Lead was down $54 at a quoted $2,565/2,570 per tonne, tin was up $170 at $16,470/16,475 per tonne and nickel was down $450 at $26,550 per tonne.
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