LONDON – Copper tumbled to its lowest since December on Friday after China’s surprise rate cut stoked fears of a slowdown in the world’s second largest economy, and as the US appeared to rule out any imminent stimulus measures.
The metal, seen as a barometer of global economic health, is on track to extend its losing streak to a sixth week, its longest such run in two years.
China’s rate cut has reflected the gravity of the slowdown in the world’s top metals consumer that may be confirmed by a raft of data due this weekend.
“China eased yesterday which has set off more of a panic that the data coming out at the weekend could be pretty grim Markets would like a co-ordinated round of policy and cuts, but so far it is only China and it’s more of a token offering than anything else,” analyst Robin Bhar of Societe Generale said.
“Markets haven’t been thrown a lifeline, and the downtrends are still in place. We could get a shot-covering bounce this afternoon but we may be $50-$100 lower by then.”
Three-month copper on the London Metal Exchange traded at $7 306.50/t at 10:04 GMT on Friday. It earlier touched its lowest since December 20 at $7 264.25/t.
China surprised investors on Thursday with its first interest rate cut since late 2008 that initially buoyed financial markets, until worries emerged that the move may be aimed at pre-empting a slew of gloomy economic data for May.
Reuters polls published earlier in the week suggested the world’s second-largest economy probably showed signs of stabilising last month from a surprisingly weak April, but now, those expectations are in doubt.
Federal Reserve chairman Ben Bernanke said on Thursday the US central bank was ready to shield the economy if financial troubles mount but offered few hints that further monetary stimulus was imminent.
Adding to the bearish tone in Europe, German imports tumbled at their fastest rate in two years in April and exports fell more than expected in another sign that Europe’s largest economy is beginning to feel the chill from the eurozone debt crisis.
CHINA MAY IMPORTS TO DROP
Data to be released over the weekend includes Chinese industrial production for May as well as trade data that is expected to show a decline in the country’s copper imports as unfavourable prices and high stockpiles continues to erode demand.
China accounts for around 40% of refined copper consumption, although as much as 80% of imports are not used immediately by industry, but by investors as collateral to secure cheaper loans.
“While we are looking for a technical rally going into the weekend we would stay calm as there remains many issues on the table which will serve to cap prices in the medium term,” RBC Capital said in a note.
Tin was at $19 600 from $19 950. A lack of nearby supply has propelled cash prices to the loftiest in nearly two years against the three months contract, trading at a premium of $80.
Zinc, used in galvanizing was at $1 884.50 from $1 909 on Thursday’s close while battery material lead was at $1 899 from $1 917, with the price differential narrowing in recent days.
Aluminium was at $1 976 from $1 992. It reached its lowest since December at $1 965 on Thursday. Nickel traded at $16 497 from $16 595 a ton recovering from 2.5 year lows near $16 000.