LONDON: Copper slipped on Thursday as markets remained cautious ahead of the release of second-quarter economic growth figures from China and as sentiment soured after the US Federal Reserve dampened speculation of further stimulus measures in the short-term.
Benchmark copper on the London Metal Exchange (LME) traded at $7,485.50 in official rings. It was untraded at the close on Wednesday, but was bid at $7,539 a tonne.
The Fed minutes said economic recovery might need to weaken for a consensus to build on more stimulus measures. The comments dashed hopes that such measures will be implemented soon.
Trading was subdued ahead of Friday's release of second-quarter gross domestic product (GDP) figures from China, which accounts for around 40 percent of global copper demand.
Analysts predict China's economic growth probably slowed further in the second quarter to 7.6 percent, its worst performance since the 2008/09 financial crisis, as investment, factory output and retail sales weakened across the board, according to a Reuters poll.
"Conditions (in China) are much weaker than is apparent at first glance when looking at GDP figures," said Daniel Brebner, analyst at Deutsche Bank.
"If you look at steel and thermal coal prices in Asia they are coming down sharply and that bodes poorly for things like copper so I do expect prices to be under some pressure."
China had already seen a double-digit fall in its copper imports last month and LME copper has seen a 14 percent fall in copper prices from this year's peak of $8,765 in February.
Copper shed close to 9 percent in the second quarter, as uncertainty about the pace of global economic growth raised concerns about the outlook for industrial metal demand. It is trading around 1 percent lower in the year to date.
"With so few trading cues and so much uncertainty in macroeconomics, investors are keeping base metal prices within a tight range. In fact, many have already shifted their focus away from industrial metals to agricultural products such as soybean meal," said an analyst with an international trader.
EURO ZONE CAUTION
Adding to the cautious tone in markets was a surprise rate cut in South Korea, a 50-basis point cut in Brazil to a record low and a lack of any clear policy action by the Bank of Japan, which prompted a pullback in risky assets.
European shares traded lower, while the euro fell to a two-year low against the dollar. The dollar also rose to its highest in two years against a basket of currencies.
A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.
In the euro zone, various member nations face obstacles getting their own people on board the bloc's policies to overcome its debt crisis.
Germany will need a few months to decide whether the EU's bailout fund and fiscal pact are legal under its laws, while Spain faced violent protests in Madrid after it unveiled new austerity measures.
"There is some weakness in the euro and another phase of austerity in Spain which is potentially going to further impact the economic strength of the country, so risky assets are under pressure," Deutsche Bank's Brebner said.
In other metals, nickel traded at $15,875 a tonne in official rings, a fresh Dec. 2009 low, from Wednesday's close of $16,100.
Battery material lead traded at $1,845 a tonne from Wednesday's close of $1,868.
"The lead market may be one to watch longer term," ANZ analysts said in a note.
Tin was at $18,525 from $18,850, while zinc, used in galvanizing, was untraded in rings, but bid at $1,831 from Wednesday's close of $1,852. Aluminium traded at $1,871 It was untraded at the close but bid at $1,901.
Comments
Comments are closed.