KH: Copper falls for third day on dollar, China demand
Copper fell for a third straight day on Tuesday, pulled lower by a stronger dollar and concerns that slower growth in China will curb demand from the world’s biggest consumer of the industrial metal.
China, the world’s second-largest economy, cut its economic growth goal to an eight-year low of 7.5 percent on Monday, sending global equities and commodities lower.
Investors appeared to have used the lower target as an excuse to take profits on long positions in commodities like copper and currencies linked to global growth.
Three-month copper on the London Metal Exchange shed 1.7 percent to $8,358.25 a tonne by 1054 GMT.
“The market reacted quite badly to the downward revision of forecasts in China, but we think it is just an excuse to move lower,” said Gianclaudio Torlizzi, a partner in metals consultancy T-Commodity.
“We see this as an opportunity to buy. We’re short now, but we’ll start buying copper at $8,000.”
The euro slipped towards a two-week low and higher-yielding currencies fell on Tuesday as worries over euro zone debt and the global economy made investors reluctant to buy riskier assets, supporting safe havens like the dollar and yen.
A stronger dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.
“The market is very unsure on the direction of the euro/dollar,” Torlizzi said. “You cannot be bullish on euro/dollar at the moment. I think we will reach a point in the following days when we see euro/dollar at a lower level than the current one and that will push metals lower.”
Decline
The decline in financial markets came despite data showing the U.S. services sector expanded at its quickest pace in a year, suggesting investors were more concerned about what is happening in China than the sustained improvements in the U.S. economy.
Credit Suisse said the current mixed bag of economic indicators in the United States and Europe may be fuelling the recent price declines in industrial metal prices.
“We think the sector needs confirmation from hard data that the economic recovery remains on track. In this context, U.S. non-farm payroll data will be important,” the bank said, adding a strong number from the data due out on Friday could put an end to the recent price falls in industrial metals.
Tin was down 1.4 percent at $22,700 from $23,050 at Monday’s close while zinc, used in galvanizing was at $2,045 from $2,087.
Battery material lead was at $2,097 from $2,146 and aluminium was at $2,253 from $2,290. Nickel was at $18,910 from $19,075.
