FX:Copper futures hover near 11-week low; Spain, China in focus
Forexpros - Copper futures were little changed near the previous session’s 11-week low on Thursday, as fears over U.S. fiscal policy and ongoing uncertainty surrounding Spain and Greece continued to weigh on appetite for riskier assets.
Market participants also focused on the start of the 18th Chinese Communist Party Congress, where a once-in-a-decade leadership change is to take place.
On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.439 a pound during European morning trade, nearly flat on the day.
Prices traded in a range between USD3.464 a pound, the daily high and a session low of USD3.434 a pound. Copper prices fell to USD3.431 a pound on Wednesday, the cheapest level since August 31.
The outlook for U.S. and global growth was clouded amid concerns over the fiscal cliff, USD600 billion of automatic tax hikes and spending cuts due to come into effect on January 1, unless lawmakers can reach an agreement.
Ratings agency Fitch warned late Wednesday that the U.S.’s triple-A rating would be at risk if Congress and President Barack Obama did not immediately take action to avoid the crisis.
There are fears that U.S. lawmakers will repeat the same political divisiveness that led Standard & Poor's to downgrade the U.S.’s AAA rating in August 2011.
Meanwhile, Spain sold more than the full targeted amount at an auction of medium-to -long term debt earlier in the day, reducing pressure on Prime Minister Mariano Rajoy to request a bailout.
Investors have been anticipating for the past month that the Spanish government would ask for a full-scale sovereign bailout.
A bailout would allow the European Central Bank to step in and buy Spanish sovereign debt, which would result in reduced borrowing costs for the debt-strapped nation. But Spain has been reluctant to do so because it may come with conditions on its budget.
Greece was also on investors mind, as the country’s parliament approved further austerity measures required to secure the next installment of bailout funds late Wednesday, but the measures look likely to exacerbate the country’s recession.
The European Central Bank holds its policy meeting later in the day, and is expected to keep interest rates unchanged.
Fresh concerns over the euro zone’s economic health emerged Wednesday, after data showed that German industrial production dropped 1.8% in September, compared to expectations for a 0.5% decline.
Adding to the gloom, the European Commission cut its growth forecast for the euro area, forecasting the 17-nation euro economy will grow by a meager 0.1% in 2013, down from a May estimate of 1%. It cut the forecast for Germany to 0.8% from 1.7%.
Market participants also focused on the start of the 18th Chinese Communist Party Congress, where a once-in-a-decade leadership change is to take place.
Xi Jinping will probably replace Hu Jintao as general secretary of the party, with investors looking for clues on how the new leadership plans to address the nation's economic slowdown.
Copper traders were also looking ahead to a flurry of Chinese economic data on Friday, including reports on inflation and industrial production, to gauge whether the world second largest economy is heading towards a hard or a soft landing.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Elsewhere on the Comex, gold for December delivery added 0.1% to trade at USD1,715.95 a troy ounce, while silver for December delivery added 0.15% to trade at USD31.71 a troy ounce.
