Copper futures tumble 2% in risk-off trade

Copper futures tumbled to the lowest level in almost a week during European morning hours on Thursday, as appetite for growth-linked assets weakened following a flurry of manufacturing and service sector activity reports from the euro zone and China. On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.7444 a pound during European morning trade, tumbling 1.85%. Earlier in the day, prices fell by as much as 2% to trade at a session low of USD3.741 a pound, the weakest level since September 14. Market sentiment remained on the back foot after data showed that Euro zone manufacturing activity improved modestly in September, but remained in contraction territory for the 13th consecutive month, while service sector activity slumped to the lowest level since July 2009. The euro zone’s manufacturing purchasing managers’ index rose to a seasonally adjusted 46.0 in September from a final reading of 45.1 in August, compared to expectations for a reading of 44.5. The services PMI fell to 46.0 from 47.2 in August. Analysts had expected the index to tick up to 47.4 in September. Manufacturing activity in France tumbled unexpectedly in September, dropping to a three-and-a-half year low. France’s manufacturing PMI fell to 42.6 in September from a final reading of 46.0 in September. Analysts had expected the index to come in at 46.4. Service sector activity in France declined to a four-month low of 46.1 in September from a final reading of 49.2 in August. Futures managed to come off the lowest levels of the session after data showed manufacturing activity in Germany in September contracted at the slowest rate in six months, while service sector activity grew modestly. Germany’s manufacturing PMI rose to 47.3 in September from a final reading of 44.7 in September. Analysts had expected the index to come in at 45.3. Service sector activity in Germany increased to a four-month high of 50.6 in September from a final reading of 48.3 in August. The data came after a report showed China’s HSBC flash purchasing managers' index ticked up to 47.8 in September from a nine-month low in August of 47.6, but remained below 50 for an 11th consecutive month in a row, showing the sector was still contracting. The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year. 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 one-week low against the greenback. The dollar index, which tracks the performance of the U.S. dollar against a basket of six other major currencies, was up 0.55% to trade at 79.60, the strongest level since September 13. A stronger dollar makes U.S. commodities more expensive for importers holding other currencies such as yen or euro. Also Thursday, Spain saw borrowing costs fall at an auction of ten-year government bonds on Thursday, amid ongoing uncertainty over whether Spain is about to ask for more financial aid, which would mean signing up to a permanent bailout fund. Spain’s Treasury sold EUR859 billion worth of 10-year government bonds at an average yield of 5.66%, down from 6.64% at a similar auction last month. Elsewhere on the Comex, gold for October delivery fell 0.45% to trade at USD1,760.75 a troy ounce, while silver for December delivery dropped 0.8% to trade at USD34.31 a troy ounce.

Courtesy: ForexPros