US copper futures were soft in early trade on Thursday, as prices extended a pull-back from two-month highs reached on Wednesday and recessionary fears soured this week's bullish sentiment, brokers said.
"It looked like some new-year buying took us up. The funds were coming in and going into the commodities, but that buying sort of dried up here, and now the market is reacting to the expectations of a weaker economy, or a potential recession," said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago.
Copper for March delivery was trading down 2.60 cents to $3.2575 a lb by 10:38 am EST (1538 GMT) on the New York Mercantile Exchange's Comex division, moving in an early-session range between $3.2150 and $3.3065.
On Wednesday, the benchmark March contract rallied to $3.3785 a lb, its highest mark since November 7, as a rebalancing of commodity index portfolios for 2008 underscored the sharper tones in the metals complex this week.
"We expect metals to drift slightly lower for the balance of the week, but the bigger moves could come next week, when more US macro numbers are released," said Edward Meir, metals analyst with MF Global. "Moreover, the impact of January index rebalancing would have ended by then as well, perhaps removing some of the intraday volatility we were seeing this week."
On Wednesday, investment bank Goldman Sachs said it expects the US economy to drop into recession this year, sparking a wave of profit-taking losses in copper - often seen as a good gage of real economic activity.