Copper fell to a two-week low on Wednesday on worries over slowing growth in Europe and China, a surging dollar and weakening oil prices, though losses were kept in check by supply delays in Peru. Service-sector growth in China weakened in October as new business cooled, a private survey showed on Wednesday, just days after other data revealed sluggish factory growth in the world's second-largest economy, which could prod Beijing to unveil fresh stimulus measures.
Also euro zone business growth picked up less than expected in October despite much deeper price cutting, according to business surveys on Wednesday. Three-month copper on the London Metal Exchange fell to $6,543.50 a tonne, the lowest level since October 20, before rebounding to close at $6,640, down 0.2 percent. The dollar rose to a seven-year high against the Japanese yen after a victory by Republicans in the US mid-term elections, while Brent oil dropped to a new four-year low below $82 a barrel. A strong dollar makes dollar-priced metals costlier for non-US investors.
"There's more downside this quarter. Market sentiment is negative, but we think it will correct (next year). The market is pricing in too much extra supply ... mine supply seems to eternally disappoint. On the demand side, we expect usage by the state grid in China to pick up," said Caroline Bain, senior commodities economist at Capital Economics. European premiums, the cost to obtain physical copper, hit their lowest level since May 2013 this month on weaker demand and plentiful availability of material, making annual supply contracts sought by producers look expensive.
But in news that could underpin prices by eroding surplus expectations next year, Peru is likely to produce less copper this year and next than the government had forecast as big new projects face delays and output from the country's top producer slides on lower ore grades. On the demand side, China is spending 200 billion yuan ($32.7 billion) to build seven new railway lines in the country, the official Shanghai Securities News quoted a powerful economic planner as saying.
Across other metals, LME lead fell to its lowest in more than a year-and-a-half at $1,955.50 a tonne, before paring losses to close at $1,994.50, down 0.6 percent. Lead was under pressure from falling demand for battery-powered e-bikes in China and the general hesitance of both investors and miners regarding a highly polluting metal. Zinc finished down 1.4 percent at $2,220 a tonne.
Aluminium closed at $2,059 a tonne, down 0.1 percent and tin ended at $19,645, up 0.4 percent. Nickel finished 0.3 percent firmer at $15,320 a tonne. More losses are likely in nickel after it has fallen 23 percent since early September, independent technical analyst Cliff Green said. "Still bearish ... I would continue to sell any rallies in nickel," he told the Reuters Global Base Metals Forum.
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