Copper slips after rally; euro zone meet eyed
London copper retreated on Tuesday, after posting its biggest single-day gain in a month in the previous session, as investors weighed whether eurozone policymakers can actually come up with solid measures to resolve a widening sovereign debt crisis. Hopes that Europe would take bolder steps to address its long-running debt crisis, which has sharply dented the outlook for global commodity demand, lifted three-month copper on the London Metal Exchange (LME) by nearly 4% on Monday, its steepest rise since October 27.By 07:05 GMT, LME copper was down half a percent at $7 459/t, after hitting a one-week top of $7 535/t on Monday. All eyes are now on a meeting of eurozone finance ministers later in the day, at which they are expected to approve detailed rules for the region’s 440-billion euro bailout fund that will clear the way for the facility to attract cash from private and public investors to its coinvestment funds.
“There was some optimism in markets yesterday but Europe’s intractable problems are clearly difficult to combat and there are no quick fixes in sight.
“The European Financial Stability Facility may not have sufficient clout and we will still need greater involvement of the European Central Bank (ECB). Investors are being cautious ahead of the meeting,” Phillip Futures analyst Ong Yi Ling.
COPPER STOCKPILES FALL
LME copper has fallen 22% this year and is on route for its first annual decline since 2008, when the global financial crisis tripped the world economy. In Shanghai, the most-active February copper contract gained 0.2% to close at 55 460 yuan/t.
The euro zone’s debt crisis has become the biggest threat to the global economy and a break-up of the region can no longer be ruled out, according to the The Organisation for Economic Cooperation and Development (OECD), which urged the ECB to play a bigger role in defusing the crisis. The OECD said the ECB should cut interest rates and step up its bond purchase programme to support confidence and economic activity in the eurozone, which has entered a mild recession.
Ratings agency Moody’s said it could downgrade the subordinated debt of 87 banks across 15 European Union nations on concerns that governments would be too cash-strapped to bail out holders of riskier bank debt in times of stress. In the US, Fitch Ratings revised its outlook on the US credit rating to negative from stable after a special congressional committee last week failed to agree on at least $1.2-trillion in deficit-reduction measures.
But in a sign copper demand remains firm in the face of troubled economies in Europe and the US, LME copper stockpiles fell 1 950 t to 392 775 t on Monday, the lowest level since February.
In China, copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 12% to 65 205 t last week. Despite the weakness in European consumption, Phillip Futures’ Ong expects China’s copper demand to grow by about 6% to 7% in 2012, albeit slower than forecast double-digit expansion this year, as the world’s top copper consumer continues to invest in big-ticket infrastructure projects.
But copper prices may be stuck in a tight range until the first quarter of 2012, said a Shanghai-based metals trader. “I’m quite neutral at the moment, not so bullish, a bit bearish. I do not see any big price movements until the first quarter. But when people get tired of bad news from Europe, maybe they will begin to consider taking long positions again,” he said.
“There was some optimism in markets yesterday but Europe’s intractable problems are clearly difficult to combat and there are no quick fixes in sight.
“The European Financial Stability Facility may not have sufficient clout and we will still need greater involvement of the European Central Bank (ECB). Investors are being cautious ahead of the meeting,” Phillip Futures analyst Ong Yi Ling.
COPPER STOCKPILES FALL
LME copper has fallen 22% this year and is on route for its first annual decline since 2008, when the global financial crisis tripped the world economy. In Shanghai, the most-active February copper contract gained 0.2% to close at 55 460 yuan/t.
The euro zone’s debt crisis has become the biggest threat to the global economy and a break-up of the region can no longer be ruled out, according to the The Organisation for Economic Cooperation and Development (OECD), which urged the ECB to play a bigger role in defusing the crisis. The OECD said the ECB should cut interest rates and step up its bond purchase programme to support confidence and economic activity in the eurozone, which has entered a mild recession.
Ratings agency Moody’s said it could downgrade the subordinated debt of 87 banks across 15 European Union nations on concerns that governments would be too cash-strapped to bail out holders of riskier bank debt in times of stress. In the US, Fitch Ratings revised its outlook on the US credit rating to negative from stable after a special congressional committee last week failed to agree on at least $1.2-trillion in deficit-reduction measures.
But in a sign copper demand remains firm in the face of troubled economies in Europe and the US, LME copper stockpiles fell 1 950 t to 392 775 t on Monday, the lowest level since February.
In China, copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 12% to 65 205 t last week. Despite the weakness in European consumption, Phillip Futures’ Ong expects China’s copper demand to grow by about 6% to 7% in 2012, albeit slower than forecast double-digit expansion this year, as the world’s top copper consumer continues to invest in big-ticket infrastructure projects.
But copper prices may be stuck in a tight range until the first quarter of 2012, said a Shanghai-based metals trader. “I’m quite neutral at the moment, not so bullish, a bit bearish. I do not see any big price movements until the first quarter. But when people get tired of bad news from Europe, maybe they will begin to consider taking long positions again,” he said.
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