CNBC: Copper hits 2-month low as U.S. election, China in focus
LONDON/SHANGHAI (Reuters) - Copper hit two-month lows on Monday as the U.S. presidential election, a leadership transition in China and two central bank meetings this week kept risk-averse investors on the sidelines of financial markets.
Victory in Tuesday's U.S. election for Republican contender Mitt Romney would pave the way for more deregulation and tax cuts, while a second term for President Barack Obama would probably bring bigger public investment in education, research and infrastructure, most analysts say.
"From a sentiment point of view and fundamental perspective, I think investors will wait and see what happens with the election. It looks like that is going to be quite a close call," said Barclays analyst Gayle Berry.
"That's the nearest thing in the horizon that might spark something in either direction (on metals prices)."
China's once-a-decade leadership transition event, the 18th Communist Party Congress, is scheduled to start on Thursday, a day that the European Central Bank and the Bank of England also will hold policy meetings.
Three-month copper on the London Metal Exchange was $7,607 per tonne in official rings, off an earlier $7,596, its lowest since September 5. It closed at $7,665.50 on Friday.
"We find that close U.S. presidential election results typically deliver positive gains for the S&P500 <.SPX>, while an incumbent remaining in power has tended to be constructive for the U.S. dollar," Deutsche Bank said in a research note.
The dollar was broadly firmer, which usually has a negative effect on dollar-priced metals because it makes them more expensive for holders of other currencies.
"In terms of China, we suspect initiatives to boost growth will come later than the financial market would like, and this will sustain the shaky foundations to price support across the industrial metals complex," Deutsche Bank said.
An announcement by China's central bank in its latest policy report that it would prioritize supporting the economy above other needs only served to affirm expectations that recovery in the Chinese growth engine is feeble at best. China is the world's largest consumer of copper, used extensively in construction and power.
WEAK CONSUMER DEMAND
In China's physical copper markets, spot prices traded at a discount to the Shanghai Futures Exchange front-month contract, indicating weak consumer demand.
Also denting sentiment were copper stocks in Shanghai Futures Exchange-monitored warehouses, which were at a six-month high at 197,937 tonnes on Friday, after rising 31 percent since September 7.
In LME-registered warehouses, copper stocks were at 204,050 tonnes, up nearly 40,000 tonnes from mid-October.
Also underscoring the risk-averse mood, U.S. hedge funds and money managers cut their net long positions in copper in the week to October 30, the Commodity Futures Trading Commission's Commitments of Traders showed.
Concerns over the global economy were highlighted at the Group of 20 Meeting on Sunday, when finance chiefs of leading economies pressed the United States to avert a rush of spending cuts and tax hikes that could hurt global output next year.
Three-month aluminum was $1,909 per tonne in rings from $1,925 at the close on Friday, and nickel was $15,850 from $15,970.
The two metals also were pressured by a decision by the Indonesian supreme court to scrap a May 6 government ban on the export of unprocessed minerals, including nickel ores and bauxite.
Three-month zinc was $1,853 in rings from $1,874. Three-month tin, untraded in rings, was bid at $20,150 from $20,160 at the close on Friday, and lead, also untraded, was bid at $2,091 from $2,095.
