RT:Copper eases on China’s move to tighten lending
COPPER prices eased in quiet trading today as tightening measures in China were tempered by better-than-expected spending data in the US.
The London Metal Exchange, the European hub for copper trading, was closed in observance of a bank holiday, adding to low volumes.
August-delivery copper settled down US1 cent, or 0.2 per cent, at $US4.0890 a pound on the Comex division of the New York Mercantile Exchange. This was the contract’s last trading day.
The most actively traded contract, for September delivery, fell US1c, or 0.2 per cent, to settle at $US4.0890 a pound.
Copper losses were tempered by data showing US consumer spending rose 0.8 per cent in July, the biggest gain in five months. Consumer spending plays a large role in economic growth, and the surprise improvement follows an upwardly revised 0.1 per cent increase in June.
“Copper is a great economic indicator … (because) it’s a widely used industrial metal,” said Frank Cholly, senior market strategist with MF Global.
Copper is used across a broad array of everyday goods from laptops and cell phones to cars and household plumbing, and demand for such goods increases when spending strengthens.
In the latest move to slow inflation and cool its booming economy, China will require banks to hold more types of deposits in reserve beginning September 5. Chinese authorities have aggressively reined in credit availability over the past year by increasing the amount of reserves banks must set aside to back loans as well as through higher interest rates.
Copper traders have feared these policies will also damp China’s demand for the red metal, and many believe the moves snapped copper’s record breaking streak to $US4.6495 earlier this year.
China accounted for about 40 per cent of the world’s refined copper consumption last year.
“The potential for more Chinese participation is there,” said Frank Lesh, a broker and analyst with FuturePath Trading. “Although they’re not buying big time, at least they’re buying something.”
Trading desks in London, a key hub for metals trading, were closed for a UK bank holiday. US trading activity was also curbed by thinner-than-normal staffing as some employees couldn’t make it to work after Hurricane Irene hit New York and other East Coast cities during the weekend, disrupting major transit arteries.
