Copper falls on Fed warning, China PMI

Three-month copper on the London Metal Exchange tumbled as much as 3.3 percent to a 10-month low of $8,028.75 a tonne by 0722 GMT.

The most-active December copper contract on the Shanghai Futures Exchange closed 4.3 percent lower at 60,260 yuan a tonne. It is down 16 percent this year.

"Sentiment was mostly pulled down by the Fed's speech overnight. They didn't unveil a QE3 and highlighted the risks within the US economy on top of it. Macroeconomics news is just very negatively lately, which weighed heavily on copper even though its fundamentals are steady," CRU analyst Qu Yi.

"I haven't seen a lot of support from Chinese buying in terms of spot demand for ShFE copper. The front-month contract is trading at a premium to the December contract only due to the sharp declines in the December contract," she added.

The Fed's comment came as it unveiled a $400 billion long-term debt purchase plan. Investors disappointed with the stimulus program sold off commodities, which were also weighed down by a firmer dollar.

China's factory sector contracted for a third consecutive month in September as flagging overseas demand put the brakes on new orders, HSBC's China Flash PMI showed on Thursday.

"Commodities will stay volatile in the short term until they each find some consolidation in a new technical range," said CIFCO analyst Zhou Jie.

"If LME copper breaches its support at $8,000, I fear there will be more downside risks from here."

Concern that the debt crisis may weaken the euro zone's banking industry remained in the market, even after Greece introduced more austerity measures to obtain the release of its next bailout package next month.

In fundamental news, Freeport-McMoRan Copper & Gold Inc. said it was unlikely to meet its third-quarter sales estimates because of a strike at its vast Grasberg mine in Indonesia.

Chinese copper imports jumped 21 percent on the month in August, although they were still down by nearly 12 percent from the same month a year ago.

Base metals fell across the board on the LME, with the three-month tin contract being the biggest loser, diving 7.6 percent to $20,000 per tonne at one point, the lowest level since Aug. 12, 2010.

The most-active November Shanghai lead contract, introduced in March this year, shed almost 6 percent in the session to a record low of 15,020 yuan. The commodity pared losses to close at 15,245 yuan, 4.6 percent below the previous day's close.

Copyright Reuters, 2011