Metals - Copper range-bound near 7,000 usd; nervous investors eye equity markets
Tue, Aug 21 2007, 14:46 GMT
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LONDON (Thomson Financial) - Copper remained range-bound near 7,000 usd in London afternoon trade as a nervous investors eyed developments in the broader financial markets for clues to the next price moves.
Base metals have been tracking moves in equities since the US sub-prime mortgage crisis started to spill over into the wider financial world.
With markets relatively steady today, price moves across the base metals complex have been limited, with investors weighing the likelihood of another slump in equities against two days of recovery.
"The thing is the market is still a bit torn between the recovery from last week's heavy sell-off and the fear in the wider markets," said Standard Chartered analyst Dan Smith. "People are trying to figure out what's going to happen next."
At 3.18 pm copper for three month delivery was trading at 7,010 usd against 7,025 usd at the close yesterday.
The market has seen heavy selling of copper and other base metals over recent weeks amid fears that the fall-out from the sub-prime mortgage debacle in the US could spill over into the wider economy.
But the Federal Reserve's decision to lower the discount rate -- the rate at which it makes short-term loans to banks -- on Friday bolstered sentiment towards the markets, in turn causing metals prices to bounce.
JP Morgan analyst Michael Jansen predicted copper would trade in a range between 6,750 usd and 7,150 usd over the coming days, unless more major news in the broader financial markets emerged.
With copper prices currently taking their cue from the broader economy, fundamentals have taken a back seat during the traditionally quiet summer season, but market players are still monitoring developments closely.
Concerns remain about the impact of labour disputes in Latin America, which is lending support to prices.
"Copper markets are also keeping an eye on actual and potential industrial unrest at several copper operations," said Commonwealth Bank of Australia analyst Tobin Gorey.
Talks began yesterday between workers and management at Grupo Mexico's giant Cananea copper mine, where a strike has been ongoing since July 30.
In Peru, the risk of a walkout at Southern Copper's Cuajone mine increased, after unions rejected a pay offer last week.
In China, the world's largest consumer of copper, news that the central bank will increase the interest rate for the fourth time this year weighed slightly on prices.
However some analysts said the move was designed to target inflation, rather than slow the growth which has boosted the base metals complex so much in recent years.
Elsewhere, inventories at London Metals Exchange-monitored warehouses increased by 1,275 tonnes to 122,300 tonnes -- the highest level in ten weeks. Copper stockpiles often rise over the summer months, as demand is seasonally lower, analysts said.
In other metals, nickel was up slightly at 26,960 usd from 26,200 usd, despite having fallen by almost 50 pct since its all time high in May.
Nickel prices have dropped sharply since May on waning demand from the stainless steel sector.
"We're still waiting for stainless steel producers to come back in," said Smith at Standard Chartered.
Elsewhere, eased to 14,200 usd versus 14,400 usd, lead slipped down to 2,885 usd from 2,924 usd on Friday, zinc fell to 3,010 usd from 3,080 usd, while aluminium prices edged up to 2,482 usd from 2,478 usd at the close yesterday.
d.sheppard@thomson.com |
