By TATYANA SHUMSKY NEW YORK—Copper futures retreated to a three-week low as market focus shifted back to Europe's government debt problems in the wake of a U.S. debt deal. The most actively traded contract, for September delivery, was down 5.2 cents, or 1.2%, at $4.3430 a pound in early trade on the Comex division of the New York Mercantile Exchange. Thinly traded August-delivery copper was down 5.55 cents, or 1.3%, at $4.3335 a pound. Italian and Spanish government bond prices have slumped this week amid fears that Europe's sovereign debt problems are spreading to economies too large to be rescued by the existing euro-zone bailout fund. The European Union is a major area of copper consumption, often second behind China, and escalating concern that a government-debt default will destabilize this economic bloc is pressuring copper futures lower. "If you don't see a recovery in Europe, obviously commodity demand is going to be soft," said Rob Kurzatkowski, senior commodity analyst with optionsXpress. Copper futures pressed lower despite a weaker dollar, which tends to make the dollar-denominated contracts appear cheaper to investors holding foreign currencies. Meanwhile, a worker strike at the world's largest copper mine, Escondida in northern Chile, has entered its 13th day. Union leaders and management are due to meet Wednesday in the hopes of resolving the conflict over labor conditions, benefits and bonus pay. Escondida accounted for about 7% of world copper production last year and has been losing around 3,000 metric tons of copper output per day of work stoppage. Last week mine operator BHP Billiton Ltd. was forced to invoke the "force majeure" clause, freeing it from meeting contract terms due to circumstances beyond its control.

Source