Copper down on dollar rise, Europe deal euphoria fades
Continued supply disruptions at the world's second largest copper mine, Grasberg in Indonesia, and steady spot demand in China are expected to limit losses.
Three-month copper on the London Metal Exchange fell 2.8 percent to $7,950 a tonne by 0701 GMT, after edging up 0.4 percent in the previous session. It is on track to end the month up 13.3 percent in the biggest monthly rise since December 2010.
"The euro zone crisis is still a concern, but copper is mostly feeling the pressure from the dollar's strong rise today. This is offsetting the support from steady spot demand by Chinese consumers," said Great Wall Futures analyst Li Rong.
The dollar spiked to a three-month high against the yen on Monday after Japan intervened in the currency markets for the third time this year to stem the yen's rise.
The euro zone crisis also weighed on investor sentiment. The head of Europe's 440 billion euro bailout fund played down hopes of a quick deal with China to throw its support behind efforts to resolve the bloc's debt crisis but said he expected Beijing to continue to buy bonds issued by the fund.
Italy's borrowing costs jumped to record levels on Friday, underlining its vulnerability at the heart of the debt crisis and scepticism about whether the struggling government of Prime Minister Silvio Berlusconi can deliver vital reforms.
The most-active January copper contract on the Shanghai Futures Exchange slipped 1.7 percent to 58,230 yuan ($9,157.68) per tonne, after jumping 2.1 percent on Friday. It is on track to post a rise of 6.3 percent, the biggest monthly gain since December.
Whether copper can sustain October's stellar monthly spike in November will depend on how confident Chinese consumers feel about stocking up on large inventories, CIFCO Futures analyst Zhou Jie said.
"Investors are taking a wait-and-see attitude ahead of the slew of data this week. There wasn't particularly good news out of the euro zone this weekend, nor evidence of the anticipated monetary loosening in China yet," Zhou added.
"People are also waiting to see if there will be any policy changes with the personnel changes to top financial regulators here."
China named new officials to three top financial regulatory posts on Saturday, the official Xinhua news agency said, the first big step in a comprehensive leadership change that will culminate when its top political leaders retire.
Sluggish income growth led US households to cut back on saving in September to raise their spending, showing the economy's recovery remains fragile.
Japanese factory output fell in September for the first time since the devastating March earthquake, a sign the economy's recovery from the disaster is tailing off in the face of slowing global growth, the strong yen and Europe's lingering debt woes.
In industry news, workers at the world's third-largest copper deposit, Chile's Collahuasi mine, ended a partial strike begun early on Saturday after reaching an agreement with management over bonus payments.
But at Freeport McMoRan Copper & Gold's Grasberg mine, talks with a union representing striking workers are deadlocked after a week of negotiations. The mine recently declared force majeure on copper concentrate sales.
Copyright Reuters, 2011