BR:Copper edges down for 2nd day ahead of Fed outcome
SINGAPORE: London copper futures eased for a second session on Wednesday, dropping further from near two-month highs reached earlier in the week on worries the Federal Reserve could curb its monetary stimulus. The Fed ends a two-day policy meeting later in the day, with recent upbeat US economic data bolstering expectations it could soon start cutting massive bond purchases that have boosted liquidity and appetite for risky assets such as copper.
"The market's jittery about a potential taper and if they do decide to do that, I think any price above $7,000 for copper would not be sustainable," said Helen Lau, senior metals analyst at UOB-Kay Hian Securities in Hong Kong.
Three-month copper on the London Metal Exchange had inched down 0.4 percent to $7,245 a tonne by 0310 GMT.
The metal on Monday touched its highest since Oct. 23 at $7,307.70. Copper for February delivery on the Shanghai Futures Exchange dropped 0.8 percent to 51,140 yuan ($8,400) a tonne.
Strong US economic data including employment and gross domestic product have nearly cemented the possibility of the US central bank cutting its $85 billion in monthly bond purchases sooner rather than later.
Nearly half of economists polled by Reuters, think the tapering will happen in either December or January, before Janet Yellen is expected to take over from Ben Bernanke as chair of the Fed. But some analysts say tame inflation data for November suggests the Fed may not rush to scale back stimulus.
"Overall, we think the Fed would need more data to confirm a sustained recovery and we maintain our view for tapering by the end of the first quarter 2014," Mizuho Bank said in a note. Also weighing on copper is tighter liquidity in China in the run-up to year-end, when banks typically shy away from lending, said Lau. "That means people may not be able to restock on copper because they don't have enough cash."
Still, China's commodity stockpiler is working on plans to buy about 300,000 tonnes of copper and 100,000-150,000 tonnes of nickel in 2014 to take advantage of weak international prices.
