Shanghai copper fell on Monday on technicals, European debt problems and uncertainty about the monetary policies of the United States and China, on track for a 1 percent loss in May. The most-active August copper contract on the Shanghai Futures Exchange closed 0.8 percent lower at 68,140 yuan per tonne.
The most active July COMEX copper contract fell 0.8 percent to $415.40 per lb ($9,158 a tonne) by 0748 GMT. The London Metal Exchange was closed and COMEX open only for electronic trading during US and UK market holidays. "Shanghai copper's fall today is a normal technical correction after rising in the last few sessions," Jinrui Futures analyst Guo Yong said. "The dollar is a little weak but not weak enough to lift commodities. Stocks and oil are down and base metals trading is thin today."
Technical charts showed that Shanghai copper is expected to retrace to 67,000 yuan per tonne, as a rebound that started at the May 12 low of 64,110 yuan has completed, Reuters technical analyst Wang Tao said. "Investors are hesitant today as the global economic picture hasn't been very encouraging with eurozone debt problems and as the US approaches the end of the second quantitative easing programme," said Shanghai CIFCO Futures analyst Zhou Jie.
"There were strong rumours of an interest rate hike in China over the weekend, which did not happen. This means that the prospect of that is still looming right now," he added. European Union and IMF officials are expected to deliver their verdict this week on Greece's faltering drive to bring its budget deficit under control, after a recent spell of bad news raised the spectre of a default.
A batch of weak data on Friday has also raised questions on whether the US economic recovery is faltering, raising expectations that authorities may keep interest rates at zero well into 2012, undermining the dollar's appeal. The dollar hovered near a two-week low against a basket of currencies on Monday and Asian stocks were pinned in tight trading ranges as weak US economic data and fears of a Greek debt default kept many investors on the sidelines.
The ShFE complex fell 0.6 percent on a volume-weighted average basis. Aluminium was the only one to buck the trend, edging up 0.1 percent to 16,750 yuan. "News of China's power shortages is lending support to aluminium prices, since production of the metal is so energy-intensive, and China is the largest producer in the world," Guo said. China's fuel supplies are expected to remain tight in June due to strong seasonal consumption coupled with additional demand from diesel-fired power generators amid ongoing power shortages, a report by the National Development and Reform Commission (NDRC) showed on Monday. China looks set for its worst power shortages since 2004, putting pressure on already squeezed industries.