US copper futures lost two percent at the open on Tuesday after heavy declines in China's stock market and softer US durable goods orders in January raised concerns about future demand growth, traders said.
James Quinn, commodity commentator with A.G. Edwards explained copper was being pressured by a combination of weaker oil prices, softer US durable goods data and the hefty drop in China's stock market, which could have repercussions in the commodity markets.
"All are encouraging what looks to be some profit-taking this morning. If China's economy begins to wane, it could have a big impact on all of these commodities," Quinn said. By 10:21 am EST (1521 GMT), copper for May delivery was down 5.85 cents, or 2 percent at $2.8115 a lb on the New York Mercantile Exchange's COMEX division, closer to the bottom of its early range between $2.7915 and $2.8650.
The now spot March contract declined 6.15 cents at $2.7940. COMEX copper futures volume was estimated at 1,000 lots by 9:00 am China's Shanghai Composite plunged nearly 9 percent on Tuesday, erasing about $140 billion of its value in the biggest one-day fall in a decade. The sharp losses were seen ahead of a meeting by parliament next week where it is feared that interest rates could be raised in an effort to cool down the blistering pace of their economy.
China's economic growth is expected to slow to around 9 percent in 2007, the official Xinhua news agency cited a government think tank researcher as saying in mid-February.
The economy will continue to expand some 7 to 8 percent annually in the coming decade, driven by the real estate and automotive sectors, Xinhua quoted Liu Shijin, deputy director of the State Council's Development Research Centre, as saying.
The economy grew 10.7 percent in 2006, according to the latest official estimate. Further strain on the red metal was seen from a drop in US durable goods orders in January, which added to worries about the health of the economy.
New orders for US-made durable goods fell by a much sharper-than-expected 7.8 percent in January as non-defence goods orders saw their biggest monthly decline ever, a government report showed on Tuesday.
However, a surprisingly strong report on the pace of US existing home sales data in January was seen offsetting the bearish news on Tuesday. US existing home sales rose 3.0 percent in January to a 6.46 million-unit annual rate, the National Association of Realtors said on Tuesday.
Another hefty drawdown in London Metal Exchange inventories continued to fan the speculation that the Chinese were back in the market, restocking their inventory levels.
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