Copper futures drop more than 1% as growth jitters weigh

Copper futures tumbled to the lowest level in more than a week during European morning hours on Monday, as appetite for growth-linked assets weakened amid mounting concerns over global growth prospects, while uncertainty over whether Spain will request a full scale sovereign bailout also weighed. On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.736 a pound during European morning trade, tumbling 1.4%. Earlier in the day, prices fell by as much as 1.6% to trade at a session low of USD3.731 a pound, the weakest level since September 13. Futures rallied to a four-month high of USD3.838 on September 19. A recent rally spurred by a series of stimulus measures by major central banks around the world in a bid to bolster their economies appears to have faded, with investors shifting their focus back to concerns over the global economy. Sentiment also remained vulnerable amid uncertainty over whether Spain will request a full scale sovereign bailout. Over the weekend, Spain’s economy minister said the country would not rush to seek external financial aid, as pressure mounted on debt-strapped country to seek a rescue package. Investors remained cautious as Madrid is to present its draft budget for next year and announce structural reforms on Thursday, while the results of bank stress tests are due on Friday. In addition, ratings agency Moody’s is expected to complete a ratings review on Spain later this week. Greece also added to concerns, after German magazine Der Spiegel reported over the weekend that the country faces a EUR20 billion budget shortfall, almost twice as much as previously thought. The risk-off trade environment prompted investors to pile in to the relative safety of the U.S. dollar, with the euro dropping to a seven-day low against the greenback. The dollar index, which tracks the performance of the U.S. dollar against a basket of six other major currencies, advanced 0.4% to trade at 79.76. A stronger dollar makes U.S. commodities more expensive for importers holding other currencies such as yen or euro. Copper traders also said that growing uncertainty over the Chinese Communist Party leadership transition, expected to take place in October, and ongoing fears over a deeper-than-expected slowdown in Chinese economic growth are also both weighing on the industrial metal. The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year. Elsewhere on the Comex, gold for December delivery dropped 1.1% to trade at USD1,758.55 a troy ounce, while silver for December delivery sank 2.45% to trade at USD33.78 a troy ounce.

Courtesy: ForexPros