Copper retreats on risk-off sentiment, profit-taking

LONDON: Copper lurched lower on Friday, hit by profit-taking and risk-off sentiment in wider financial markets on worries about surging inflation.

Benchmark copper on the London Metal Exchange (LME) had shed 3.4% to $9,908 a tonne by 1515 GMT after three days of gains that propelled the price to its highest in nearly four months.

Global stock markets fell after US consumer prices showed the biggest annual increase in 40 years, which is expected to prompt tighter monetary policy from the US Federal Reserve.

“Today it’s really risk-off sentiment in financial markets and the dollar is up based on yesterday’s CPI. There’s also likely some profit-taking after the run-up we’ve seen,” said Julius Baer analyst Carsten Menke.

“In terms of the bigger picture, there’s a general cooling of the economy in China. Infrastructure and property are both key in terms of driving metals demand and we do not expect a quick reversal in either.”

Menke forecasts LME copper to ease to $9,500 a tonne in three months and to $8,750 in 12 months.

On a weekly basis, however, most base metals still showed gains, led by aluminium, which was supported earlier this week by smelter shutdowns in China and Europe and low inventories at exchange warehouses.

The Yangshan copper premium , an indication of physical demand in China, slid to $38 a tonne on Friday, the weakest since July last year and down from $102 two months ago. LME aluminium, which scaled its highest in more than 13 years on Thursday, dropped 3% to $3,152.50 a tonne. Metals were also knocked by large inflows of inventories into ShFE warehouses, with copper surging by 164% and nickel by 77%.

It was the first weekly stocks data since China closed for its New Year celebrations.