METALS-London copper hits six-month low as growth jitters resurface

London copper hit fresh six-month lows on Friday, as jitters over global growth returned to disrupt a fragile calm that had briefly shored up markets on signs of strength in the U.S. economy.

A robust labour report and improving manufacturing data in the United States calmed turbulence in global markets early in the Asian session on Friday. But by European hours, oil prices had resumed their fall alongside copper.

“People are coming around to the notion that the global economy is starting to slow down. Many countries are in recession and it’s scary,” said analyst Ed Meir at broker INTL FCSTONE in New York.

“I don’t think this is the bottom. I think we’ll have another retest of the lows and maybe bounce from there.”

Three-month copper on the London Metal Exchange, which had climbed 0.6 percent, erased the gains to trade at $6547.75 at 0721 GMT. It fell to $6,530 a tonne, its cheapest since April 15.

Market attention is returning to the euro zone due to stagnating growth, low inflation, budget problems in France and Italy and rising political risk in Greece, where the bloc’s debt crisis began in 2009.

Next week’s China data could show further deterioration in the world’s second-biggest economy although this may give a short-term boost to prices if consensus swings to expect targeted easing.

A dramatic fall in Chinese interest rate swaps (IRS) this week suggests markets are betting a run of weak economic data will force the central bank to cut its benchmark deposit rate for the first time in over 2 years to support growth.

China’s economy likely grew at its weakest pace in more than five years in the third quarter as a property downturn weighed on demand, a Reuters poll showed, raising the chances of more aggressive policy steps that may include cutting interest rates. China will publish GDP data on Oct. 21.

The most-traded December copper contract on the Shanghai Futures Exchange closed 2 percent down at 46,750 yuan ($7,632) a tonne. Prices closing at the day’s lows can be construed as a sell signal for chart-following funds.

BNP Paribas estimates that China’s net buildup of unreported copper stocks from 2009-2013 may have been greater than 1.5 million tonnes, much of which may be sitting outside bonded warehouses and strategic state reserves.

“We expect pressure to remain more to the downside, until deep into 2015. Copper would be highly exposed were the world economy to deteriorate sharply.” The bank expects copper prices to average at $6,500 in 2015, from $6,890 a tonne this year.

Other LME contracts trimmed early gains of half to nearly 1.5 percent after a series of fresh lows on Thursday. LME zinc fell to its weakest in more than three months, LME nickel hit a 7-month trough, and lead and tin hit 17- and 15-month troughs respectively.

In news, Marcventures Holdings Inc, one of the Philippines’ biggest nickel miners, has won government approval to expand its mining operations, helping it to ramp up ore exports to top buyer China, the company said on Friday.

Fresh from a court win in Britain, the LME now faces one of its biggest hurdles yet in its years-long crisis over its warehousing policy that consumers say has inflated prices: convincing U.S. lawmakers its reforms are enough.

Curled from Reuters

Leave a Reply

Your email address will not be published.