FX:Copper falls to session low after Spain, Italy bond sales
Forexpros - Copper futures fell to the lowest levels of the day during European morning trade on Tuesday, after Spain and Italy both saw borrowing costs spike higher at debt auctions earlier in the day.
On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at USD3.313 a pound during European morning trade, shedding 0.35%.
It earlier fell by as much as 0.5% to trade at a daily low of USD3.306 a pound. Prices touched a three-week low of USD3.256 a pound on June 22.
Copper prices held on to losses after Spain’s Treasury auctioned slightly more that the targeted amount of EUR 3 billion, selling EUR1.6 billion worth of three-month government bonds at an average yield of 2.36%, up sharply from 0.84% at a similar auction last month.
Spain also sold EUR1.48 billion of six-month debt at an average yield of 3.23%, up from 1.73% in May.
Following the auction the yield on Spanish 10-year bonds climbed to 6.69%, nearing the critical 7% threshold, which is widely viewed as unsustainable in the long term.
On Monday, rating’s agency Moody’s downgraded 28 Spanish banks, citing concerns over Madrid’s ability to support its banking sector, which the agency said was vulnerable to further losses from Spain's real-estate bust.
Earlier Monday, Spain’s government formally requested aid of up to EUR100 billion for its banks from its euro zone partners. Spain’s economy minister said the amount should be enough to cover the needs of all banks and provide an additional security buffer.
Meanwhile, Italy’s Treasury sold EUR2.99 billion worth of two-year government bonds maturing in May 2014 at an average yield of 4.712% earlier in the day, the highest since December and up from 4.037% at a similar auction last month.
Meanwhile, investor sentiment remained fragile amid doubts over whether an upcoming European Union summit will result in fresh measures to tackle the region’s debt crisis.
On Monday after German Chancellor Angela Merkel crushed any hopes that euro zone countries will eventually issue common Eurobonds to help indebted nations, calling such an idea “economically wrong” and “counterproductive”.
Meanwhile, Greece’s new finance minister was forced to resign, due to health issues, while Prime Minister Antonis Samaras said he would not be able to attend this week’s EU summit given that he had just undergone eye surgery.
Europe as a region is second in global demand for the industrial metal. Prices have tracked investor sentiment toward the euro zone’s debt crisis in recent months.
Meanwhile, ongoing concerns over the health of the global economy further weighed. Copper is sensitive to the global economic outlook because of its widespread uses in construction and manufacturing.
HSBC Holdings joined Citigroup in cutting growth forecasts for China. HSBC cut its forecast for China’s 2012 growth to 8.4% from 8.6%. That came a day after Citigroup lowered its estimate for China’s growth this year to 7.8% from 8.1%.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Copper prices have been on a rapid decline since the start of May, losing nearly 14% amid growing fears over an escalating debt crisis in the euro zone and a deeper-than-expected slowdown in China.
A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of debt crisis in the euro zone.
Elsewhere on the Comex, gold for August delivery shed 0.35% to trade at USD1,583.05 a troy ounce, while silver for September delivery declined 0.65% to trade at USD27.40 a troy ounce.
