SINGAPORE: London copper hit a three-week low on Thursday as talks to avert a US fiscal crisis stalled, keeping investors on edge, but losses were limited by signs of improvement in the economy of top consumer China.
China's economic growth regained momentum into early December, helping copper rally near 8 percent from mid-November, although momentum has since petered out.
Markets are worried that US lawmakers may not meet a year-end deadline to fix expiring spending rises and tax cuts that could tip the world's top economy back into recession, while investors have wound up positions before the Christmas break.
"A lot of people in Western markets are on holiday and that may make the LME market relatively quiet so (prices) are likely to remain around current levels for now," said Chunlan Li, a Beijing-based copper analyst with consultancy CRU.
The conflict over the stalled "fiscal cliff" talks grew more heated on Wednesday and threatened to become even more so on Thursday when the action is expected to shift for the first time to the floor of the US House of Representatives.
This pushed Asian shares back from their highest level in nearly 17 months the day before.
Meanwhile, the money that flowed into US commodity products and funds in November was the smallest in 1-1/2 years and little improvement is expected before year-end as investors worry about the potential fiscal crisis, according to fund tracker Lipper.
Three-month copper on the London Metal Exchange slipped by 0.52 percent to $7,885 a tonne by 0702 GMT, adding to losses in the previous session, when prices dropped by more than 1 percent.
Prices, which rallied nearly 8 percent from mid-November to reach a near 2-month top at $8,162 on Dec. 12, have since lost almost half of those gains, hitting their lowest since Nov. 29 at $7,863.00 earlier in the session.
The most-traded March copper contract on the Shanghai Futures Exchange slipped 1.35 percent to close at 56,870 yuan ($9,100) a tonne.
China's vast manufacturing sector expanded in December, data showed this month and this has been reflected in small purchases by consumers. China is the world's top copper consumer, accounting for 40 percent of refined demand last year.
"From late November to early December, downstream users in China built up stocks. Demand now is OK but not very strong," Li added.
Premiums for bonded stock in Shanghai have stayed around $40-$60 for several weeks, she said.
Copper pierced chart support at the nexus of the 100, 200 and 30 day moving averages around $7,875 a tonne, which could trigger some technical-led selling if prices close below this level this week.
"The rest of the metals appear in relatively good shape ... and look set to finish the year strong despite lingering worries over the fiscal cliff," RBC Capital said in a note.
Comments
Comments are closed.