3-M LME copper prices drop back to 2009 levels

Wednesday, January 14, 2015

Three month LME copper prices hit a fresh multi-year low during overnight trading as the demand outlook continued to deteriorate with prices for the red metal extending declines for a tenth straight session. Copper prices closed 2.6% lower yesterday with trading activity overnight extending declines below $5,350/tonne for the first time since July 2009 as futures traded as much as 8.6% lower from Tuesday’s close. As we approach the European session, copper prices have recovered some of these protracted losses, trading around $5,500/tonne but downward pressure looks set to dominate today’s session. The weakness seen in recent weeks can be attributed in part to the rout in crude oil markets, however, the global growth outlook faces considerable headwinds and investors are exercising extreme caution with respect to commodity investments.

The World Bank cut its forecast for global growth last night outlining significant risks of a world economy over reliant on growth in the US. While lower oil prices would be a boon for global manufacturing and industrial activity, weaker consumer and business confidence and the lack of additional tools available to central bankers in an already loose monetary environment would create substantial obstacles in the way of achieving inflation targets. In its twice annual report on global growth the World Bank forecast global growth would increase by 3% this year and 3.3% in 2016, a downward revision from their previous forecast in June last year which projected 3.4% growth in 2015 and 3.5% in 2016. Notable updates saw US growth projections revised upwards from 3% to 3.2% this year while eurozone growth was slashed from 1.8% to 1.1% in 2015. 

30 year US treasury yields dropped towards a record low as investors in a knee jerk reaction rushed into safe haven assets. Thirty year yields pulled back towards 2.4567% as the entire term structure shifted down, pulling 10 year yields back down towards level last seen in May 2013, towards 1.85%. With oil prices showing no signs of halting their precipitous declines investors are having a hard time finding investment opportunities and if the situation continues to deteriorate we could see yields pullback further.

LME copper prices drop sharply as the World Bank slashes its global growth forecast

LMCADS03 Comdty LME COPPER 3 2015 01 14 07 25 45

30-year US treasury yields fall back to record lows

USGG30YR Index US Generic Govt 2015 01 14 07 56 58

Events for today

1000

EZ

Nov

Industrial Production

1330

US

Dec

Retail Sales

1330

US

Dec

Import Price Index

1500

US

Nov

Business Inventories

1530

US

w/e

EIA Energy Stocks

2350

JP

Dec

PPI

Topics: Copper, LME, Yields
More from: Kash Kamal