Copper dips on gloomy US economic outlook

Copper slipped today, extending losses from the previous session, after US jobs and manufacturing data came in below expectations and raised worries about the health of the global economy.

Benchmark copper on the London Metal Exchange was at $9,063.75 a tonne by 0922 GMT, from $9,102 a tonne at the close on Wednesday, but trading volumes were lower than usual due to a religious holiday closing offices in most European countries. Earlier, the metal used in power and construction hit a weekly low of $9,016.

“I think a read through weaker (manufacturing data), particularly in the US, is being the main driver at the moment,” said Daniel Major, an analyst at RBS.

“The market is just very apprehensive and it’s waiting for payrolls data on Friday to confirm what has been a softer trend in macro data.”

US companies hired far fewer workers than expected in May and output in the manufacturing sector slowed to its lowest level since 2009, adding to concerns that the U.S. recovery is running out of steam.

The figures do not bode well for Friday’s US non-farm payrolls data, analysts said.

“It’s healthy for the market to consolidate and take stock,” a trader said. “There has been a little bit of physical interest in Asia but I suspect we won’t see any real movement until such a time as the SHFE-LME window opens.” Slower-than-expected manufacturing expansion in top metals consumer China and in the Euro zone was also weighing on sentiment.

“The PMI data for June suggested that the pace of manufacturing is slowing faster than expected in the Western World, although holding up better than anticipated in China if usual seasonality holds,” Macquarie said in a note.

LOWER IMPORTS
Inventories of copper on LME rose 2,650 tonnes to 473,500 tonnes, the highest in a year.

The noticeable increase in LME copper stocks seen since December last year raised some concerns about waning imports from top consumer China. But this increase was partly balanced, by a recent reduction registered in inventories in Shanghai and off-warrant stocks, analysts pointed out.

Higher LME stocks do not show a decline in global underlining demand but rather lower imports into China, which is tapping into its inventories after having stockpiled material last year, Major said.

Given the seasonal weakness in copper consumption, a strong rebound in Chinese imports is unlikely in the next two months but imports should increase at the end of the third quarter and in the fourth quarter, he added.

Aluminium was at $2,655 from a last bid at $2,667 on Wednesday and zinc, used in galvanizing steel, was at $2,252 from $2,257. Battery material lead was at $2,478.75 from $2,500 and tin was at $27,200 from $27,595 Wednesday’s close.

Source: http://www.business-standard.com/india/news/copper-dipsgloomy-us-economic-outlook/437633/