Copper Steady but Demand Doubts Weigh
Source: Reuters, Pratima Desai and Maytaal Angel (8/23/10)
"In the short term, macro environment is turning against industrial metals."
Traders were also watching the premium or backwardation on LME aluminum to be delivered on Tuesday and bought back on Wednesday—known as the tom/next and often used to lend metal to entities that are short of the metal.
Benchmark copper on the LME ended at $7,255/ton. The closing bid on Friday of the metal used in power and construction was $7,252/ton.
Stock markets, seen by some as a proxy for economic growth, rose in Europe from last week's one-month low as more M&A news improved sentiment, but Wall Street was mixed.
Also weighing on metals, the dollar resumed gains clocked up last week when poor data from the U.S. rattled investors and prompted a move into the perceived safety of the U.S currency.
A strong dollar makes dollar-priced metals costly for European investors.
"European shares have helped today (but) if we see a further increase in the dollar this is a negative sign," said Commerzbank Analyst Daniel Briesmann. "We expect further falls in base metals in the short term mainly because of further poor economic data and a further slowdown in imports from China."
Chinese CPI data in the middle of September could be a trigger for policy tightening. But, before then, the market will see surveys of China's purchasing managers in manufacturing. Recent releases have shown activity in many countries expanding at a slower pace.
"You are looking at an economic environment in the U.S. which is likely to remain a concern and growth rates in China could be under pressure," said Deutsche Analyst Bank Dan Brebner. "In the short term, the macro environment is turning against industrial metals."