SG:Copper falls as China factory data and euro zone PMI weigh
Reuters reported that copper prices fell to 2 week low after shrinking factory activity in top consumer China and worsening euro zone purchasing managers indexes raised concerns about the outlook for demand with a weak euro adding pressure to prices.
Benchmark copper on the London Metal Exchange was untraded in official rings but bid at USD 8,289 per tonne from Wednesday's close of USD 8,455 per tonne. The metal used in power and construction earlier fell to its lowest level since March 7th 2012 at USD 8,280 per tonne dropping below its 200 day moving average.
The HSBC flash purchasing managers index the earliest indicator of China's industrial activity showed that China's manufacturing sector activity shrank in March with the overall rate of contraction accelerating and new orders sinking to 4 month low.
Mr Peter Fertig consultant at Quantitative Commodity Research said that "It indicates economic activity in China is slowing down and this is nothing new. China also exports to the euro zone and it is falling victim to the crisis there. But the Chinese administration is doing all it can to foster domestic demand so even though we are currently going through a difficult period, looking forward I expect to see a rebound."
The market was also rattled after Germany's manufacturing sector shrank for the first time this year in March and data showing the euro zone's economy took an unexpected turn for the worse in March. The data knocked the euro to a session low against the dollar. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.
Copper has risen around 9% so far this year, as investors weigh up the prospects of brightening outlook for the US economy against a slow pick up in demand from China which accounts for 40% of global consumption following the Lunar New Year earlier this year.
Macquarie said that in terms of fundamentals, Chinese trade data this week showed copper imports in February remained strong in part as the metal is used as collateral for cheaper funding but this may lead to lower imports ahead. We expect that due to sufficient copper availability on the ground in China we will see net imports of copper decline in March.
