Copper plunges to 14-month low
Copper collapsed to its lowest close in 14 months on Wednesday as trepidation ahead of a German vote to beef up the euro zone’s rescue fund ignited another severe sell-off in commodities. Copper’s losses gathered steam in after-hours business, losing more than seven per cent and sustaining its second-largest drop since late 2008. The move in the metal was much more violent than other risk markets like equities, which only eased as investors positioned in front of the vote on Thursday, which now ran the risk of not passing as Germany sought to take a more modest approach in its support to Europe’s weak economies and banks. “I don’t know if we’re going to get it,” said Steve Platt, futures analyst with Archer Financial Services in Chicago, said of a positive funding vote. “What happens then?”That pessimistic view stood behind the widespread losses in commodities. The Reuters-Jefferies CRB index, a global commodities benchmark, lost 2.5 per cent of its value.
End-of-quarter positioning and a firmer US dollar added to the downside pressure, analysts said.
Risk aversion savaged global markets overnight, pressuring the Shanghai Composite Index down to a new low for the year and taking the heavily China-dependent copper price with it.
Some analysts said a cheaper copper price may entice Chinese buyers.
“We have seen China absent from the copper market for large periods of time this year. Since we had this dramatic price fall, we expect to see some restocking happen in China over the next few months,” said Caroline Bain, economist at the Economist Intelligence Unit.
London Metal Exchange (LME) benchmark copper went untraded at the close, but was bid at $US7,250 a tonne, down 4.5 per cent from its close at $US7,594 on Tuesday. Losses gathered steam in electronic business, pressuring the price further down below $US7,100 and closer to Tuesday’s 14-month trough at $US6,800.
Since the start of the sell-off late last week, total market open interest in London copper is up nearly nine per cent, suggesting more short positions are being built.
In New York, the key December COMEX contract plunged 19.30 US cents, or 5.6 per cent, to settle at $US3.2465 per lb, with after-hours losses taking it to a late low at $US3.1680.
Volumes picked up alongside the late sales burst. Close to 68,000 lots traded in New York, more than 40 per cent above the 30-day norm, according to Thomson Reuters preliminary data.
With problems in Europe still at the forefront of investors’ minds, encouraging US data failed to make a dent.
US businesses were seen shrugging off an uncertain economic environment by stepping up orders for capital goods in August.
“We had not only the stronger print in August, but also an upward revision, so that’s a sign that in spite of all the concerns and worries related to the debt crisis, there still seems to be spending,” CIBC’s Buchanan said.
“It’s a sign that the economy, while it’s weak, is in all likelihood not in recession at this point.”
Traders and analysts think volatility will be a feature of the market until Friday, which marks the end of the month and quarter.
“Window dressing (an attempt to make investments look better) is inevitable and there will be an element of clearing the decks ahead of the fourth quarter,” a trader said. “There are a lot of people nursing some quite large losses.”
Clearing the decks is a reference to position squaring.
End-of-quarter positioning and a firmer US dollar added to the downside pressure, analysts said.
Risk aversion savaged global markets overnight, pressuring the Shanghai Composite Index down to a new low for the year and taking the heavily China-dependent copper price with it.
Some analysts said a cheaper copper price may entice Chinese buyers.
“We have seen China absent from the copper market for large periods of time this year. Since we had this dramatic price fall, we expect to see some restocking happen in China over the next few months,” said Caroline Bain, economist at the Economist Intelligence Unit.
London Metal Exchange (LME) benchmark copper went untraded at the close, but was bid at $US7,250 a tonne, down 4.5 per cent from its close at $US7,594 on Tuesday. Losses gathered steam in electronic business, pressuring the price further down below $US7,100 and closer to Tuesday’s 14-month trough at $US6,800.
Since the start of the sell-off late last week, total market open interest in London copper is up nearly nine per cent, suggesting more short positions are being built.
In New York, the key December COMEX contract plunged 19.30 US cents, or 5.6 per cent, to settle at $US3.2465 per lb, with after-hours losses taking it to a late low at $US3.1680.
Volumes picked up alongside the late sales burst. Close to 68,000 lots traded in New York, more than 40 per cent above the 30-day norm, according to Thomson Reuters preliminary data.
With problems in Europe still at the forefront of investors’ minds, encouraging US data failed to make a dent.
US businesses were seen shrugging off an uncertain economic environment by stepping up orders for capital goods in August.
“We had not only the stronger print in August, but also an upward revision, so that’s a sign that in spite of all the concerns and worries related to the debt crisis, there still seems to be spending,” CIBC’s Buchanan said.
“It’s a sign that the economy, while it’s weak, is in all likelihood not in recession at this point.”
Traders and analysts think volatility will be a feature of the market until Friday, which marks the end of the month and quarter.
“Window dressing (an attempt to make investments look better) is inevitable and there will be an element of clearing the decks ahead of the fourth quarter,” a trader said. “There are a lot of people nursing some quite large losses.”
Clearing the decks is a reference to position squaring.
Comments
Post a Comment