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CORRECTED-METALS-Copper falls on weak data, fading EU euphoria
July 2, 2012 / 9:56 AM / 5 years ago

CORRECTED-METALS-Copper falls on weak data, fading EU euphoria

(Correcting COMEX settlement and percentage change in 7th paragraph)
    * Copper falls in line with euro
    * China, Japan PMIs weakest in seven months
    * Euro zone manufacturing contracts in June
    * US ISM manufacturing index for June falls vs May

    By Maytaal Angel and Josephine Mason
    LONDON/NEW YORK, July 2 (Reuters) - Copper prices were almost 1 percent
lower on Monday in line with a weaker euro as a string of bleak global
macroeconomic data reignited concerns about demand for the red metal, bringing
an abrupt end to last week's short covering rally. 
    Euphoria over last week's EU summit deal faded, after the U.S. manufacturing
sector unexpectedly contracted in June for the first time since July 2009 as new
orders tumbled, according to an industry report released on Monday.
    That came after business surveys on Monday showed manufacturing activity in
the euro zone held at its lowest level since June 2009, with factories preparing
for worse to come as jobs were cut at the fastest rate in two-and-a-half years.
    A factory slump in China and Japan deepened as crumbling orders from abroad
dragged activity to seven-month lows, heightening worries that the health of the
global economy is deteriorating. 
    "Although last week's EU Summit provided a brief glimmer of hope, triggering
a sharp bout of end-quarter short covering, today's PMI data has signaled a
return to reality and reinforced evidence of a faltering global economic
outlook," said VTB Capital base metal analyst Wiktor Bielski.
    Three-month copper on the London Metal Exchange closed at $7,625 per
tonne from $7,690 at the close on Friday, when the metal surged 4.1 percent, its
largest single-day rise since Nov. 30. 
    In New York, the most-active September COMEX contract settled at
$3.469 per lb, down 0.78 percent from $3.4965 per lb on Friday.
    Monday's downbeat performance was in stark contrast to Friday's jubilation
when prices rose almost 5 percent to one-month highs following a deal by Euro
leaders to allow rescue funds for sovereign debt purchases without forcing
countries to adopt extra austerity measures. Countries will also be able to
recapitalize banks directly without increasing their budget deficit.
    "I suspect markets are going to look again at what was agreed on Friday with
the euro zone, and the risk is they will conclude that this isn't the silver
bullet and a lot more needs to be known," BNP Paribas analyst Stephen Briggs
    The market was also nervous ahead of a heavy week for economic data. Trading
volumes in the United States may be lower than usual ahead of the Independence
Day holiday on Wednesday.
    Spanish and Italian government bond yields continued to fall on Monday, but
the euro dipped and the dollar rose against a basket of currencies as
summit-deal euphoria faded. A weak euro makes dollar-priced metals more costly
for European investors.  
    "The EU summit also lifted industrial metals prices. Being the most cyclical
markets, industrial metals may find it more difficult than other commodities to
sustain their latest gains as China's manufacturing activity has yet to
improve," said Credit Suisse in a note.
    Market players noted that copper demand had improved in China in recent
weeks as bargain-hunting consumers restocked a bit to take advantage of lower
prices, but overall demand remained low. 
    "Investors are less focused on the Chinese physical copper market for now as
things are still gloomy, with downstream industry orders still sluggish," said
Orient Futures derivatives director Andy Du.
    In the United States, consumer spending growth ground to a halt in May as
auto purchases flagged, while confidence ebbed to a six-month low in June, the
latest signs of trouble for the economy. 
    Federal Reserve officials on Friday said they were keeping an eye out for
any signs that slowing growth was raising deflation risks but differed on how
worrisome sluggish job markets were for the modest U.S. economic recovery. 
    Packaging metal aluminum closed at $1,909 a tonne from a close of
$1,911, recovering from last week's two-year lows that followed news China's top
aluminum-producing province, Henan, had cut electricity prices for smelters.
    Traders in China came back into the market after realizing the tariff cuts
were too small to boost additional supplies and that top producer Aluminum
Corporation of China Limited had raised its long positions in Shanghai aluminum
even as prices fell. 
    "It's clear they are prepared to support domestic aluminum prices by buying
or by cutting production," said a trader. 
    Soldering metal tin closed at $18,900 a tonne from $18,775 at the
close on Friday, battery material lead at $1,879 a tonne from $1,861,
nickel at $16,750 a tonne from $16,730, and zinc at $1,872 a
tonne from $1,880.    
 Metal Prices at 1811 GMT
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
  COMEX Cu       347.00       -2.65     -0.76     343.60      0.99
  LME Alum      1908.00       -3.00     -0.16    2020.00     -5.54
  LME Cu        7625.00      -65.00     -0.85    7600.00      0.33
  LME Lead      1879.00       18.00     +0.97    2035.00     -7.67
  LME Nickel   16755.00       25.00     +0.15   18710.00    -10.45
  LME Tin      18900.00      125.00     +0.67   19200.00     -1.56
  LME Zinc      1871.00       -9.00     -0.48    1845.00      1.41
  SHFE Alu     15455.00       35.00     +0.23   15845.00     -2.46
  SHFE Cu*     55540.00      110.00     +0.20   55360.00      0.33
  SHFE Zin     14660.00      105.00     +0.72   14795.00     -0.91
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
 (Additional reporting by Susan Thomas; editing by William Hardy, Jane Baird and
Bob Burgdorfer)

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