Copper loses steam on economic worries, technical signals
LONDON (June 6) Copper prices stumbled on Tuesday on persistent worries about economic growth after weak U.S. data and on bearish technical signals that encouraged speculators to sell.
Three-month copper on the London Metal Exchange CMCU3 eased 0.7% to $8,281 a tonne by 0930 GMT after rising by 1.2% on Monday.
"The weak data we had from the U.S. yesterday indicates the U.S. economy finally starting to show some signs of weakness," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"If you have a macro economic focus when you make your investment decisions, you're probably sitting on the fence right now, or if anything maybe holding a small short."
Data on Monday showed the U.S. services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low.
Speculative short sellers have regained the upper hand after LME copper failed to break above the key technical level of the 200-day moving average over the past two days, he added.
"As long as we stay below that level, the bounce we have seen so far has been a weak bounce within a downtrend," Hansen said.
In Shanghai, copper prices briefly hit their highest in nearly four weeks, partly on hopes that China will announce more economic support measures that will boost metals demand.
The most-traded July copper contract on the Shanghai Futures Exchange SCFcv1, pared gains and closed up 0.7% at 66,450 yuan a tonne.
Top metals consumer China will likely further cut banks' reserve ratio and interest rates in the second half of this year to support the economy, the China Securities Journal reported.
Some investors were sceptical about China after optimism earlier in the year led to disappointment when demand failed to rebound strongly, Hansen added.
Among other metals, LME aluminium CMAL3 dropped 1% to $2,221 a tonne, while nickel CMNI3 climbed 1.4% to $21,195, zinc CMZN3 rose 0.3% to $2,295.50, lead CMPB3 added 0.3% to $2,033 and tin CMSN3 gained 0.9% to $25,795.
Reuters
