Copper down on fall in equities, economic uncertainty

SHANGHAI: London copper futures fell on Thursday in line with a drop in equities as uncertainty about the global economy weighed on sentiment.

European equities followed Asian stocks lower as investors fretting about the global growth outlook cut exposure to riskier assets.

China's benchmark stock index ended down 1.6 percent, dragged lower by property and cement companies as a rise in central bank bill yields sparked worries over a potential interest rate rise.

Three-month copper on the London Metal Exchange fell 0.7 percent to $8,908.75 a tonne by 0717 GMT.

The most-active November copper contract on the Shanghai Futures Exchange fell 0.2 percent to close at 66,700 yuan per tonne.

"In the short term, I think copper is range-bound between 63,500-67,500 yuan on the ShFE and $8,600-$9,000 on the LME," Jinrui Futures analyst Zhao Kai said.

"For now, copper prices may hesitate near the upper limits of their ranges on both the ShFE and LME. There needs to be more clarity about the global economic situation before it can move decisively in any direction."

LME copper has turned bearish as it failed to break above resistance at $9,003 per tonne, according to Reuters technical analyst Wang Tao.

Although the arbitrage window between LME and SHFE copper narrowed today, some deals are still being made, given that LME prices are still relatively cheaper, said Minmetals Futures analyst Zhuo Gui Qiu.

But these are not enough to lift LME copper into positive territory today as investor sentiment turned bearish.

"Most traders are still wary about taking long positions as Chinese buyers seem to be hanging back today to see if prices will fall from here," he said.

"It's the traditionally slower summer season in China and the global economic environment is very uncertain, so investors are taking a wait-and-see attitude now."

LME third month copper is trading at a 127-yuan discount to the ShFE November contract, taking into account China's 17 percent VAT.

Plans from France and Germany to move toward fiscal union in 2012 got a chilly response from other euro-zone countries and failed to reassure investors worried about the region's debt crisis, while the Bank of England edged closer to more quantitative easing.

Supply threats in Latin America lingered on, with workers at the world's No. 3 copper mine, Chile's Collahuasi, threatening a one-day stoppage on Sept. 2 if the company does not hire back workers fired after a previous disruption.

Copyright Reuters, 2011