Copper prices head for a fourth straight week of declines

Friday, March 14, 2014

Three month LME copper prices are on track for a fourth consecutive weekly decline as investors remain cautious of contagion risk. Prices dropped to their lowest levels since July 2010 prompting concerns the red metal could be losing its lustre in financing deals as Beijing clamps down on the shadow banking sector. As a result there could be a significant unwinding of positions and a wave of metal stored in warehouses for such purposes could enter the physical market, contributing to significant volatility in prices.

Asian equities ended the week on the back foot as mounting concerns regarding Chinese growth prompted a widespread retreat from investors. Japanese benchmark indices suffered a sharp sell-off with the Nikkei losing 3.3% and the TOPIX shedding 3.22% off its value overnight, capping weekly losses at 5.72% and 5.43% respectively. Chinese equity markets struggled to build on the previous session’s gains as the Shanghai Composite and CSI 300 both lost 0.8%. Market participants are slowly losing confidence in Beijing’s ability to sustain growth momentum after another default, this time by Haixin, a private steel mill in the north. The reluctance of the administration to bailout the issuer’s is proving to be a bitter pill to swallow for investors. On the one hand it signals less intervention in capital markets but on the other hand the move, coming at a time of slowing growth momentum, could trigger a further sell-off in equity markets and industrial commodities.

Wall Street struggled to hold on to tentative support levels around record highs as the S&P 500 closed 1.17% lower and the DJIA erased 1.41% off its value. The sharp sell-off towards the end of the week on weaker Chinese industrial production and retail sales has wiped out almost all of the year-to-date gains in the S&P 500 with tension in Ukraine compounding the situation. The sell-off signalled at a dramatic shift in sentiment after US equity markets rallied throughout February with better than expected initial weekly jobless claims and retail sales growth in February unable to shore up sentiment. Demand for gold remained firm as spot prices closed above $1,370/oz, rising for the third consecutive session. Prices this morning have built on yesterday’s close as they test levels above $1,375/oz.

 S&P 500 erases year-to-date gains on China, Ukraine concerns

SPX Index SP 500 Index 2014 03 14 07 42 08

Three month LME copper prices are on track for fourth straight week of declines

LMCADS03 Comdty LME COPPER 3 2014 03 14 07 48 58


Events for today:

0700

DE

Feb

CPI final

1230

US

Feb

PPI

1355

US

Mar

University of Michigan survey

LT:

Mar  Cocoa (NYBOT), Cocoa (LIFFE)

Apr   Brent Crude (ICE)

OE: 

Apr Sugar (NYBOT), WTI Crude (Nymex)

All times UK Local Time

Economic Market Calendar

Topics: Copper, Equities, Gold
More from: Kash Kamal