Global Debt Concerns, Dollar Pressure Copper
Source: Dow Jones, Tatyana Shmusky (7/18/11)
"Copper, a bellwether for economic growth, inched lower as debt problems in Europe and the U.S. continue to cloud the economic outlook."
Copper futures inched lower Monday as debt problems in Europe and the U.S. continue to cloud the economic outlook.
Copper is widely considered a bellwether for economic growth. The metal is used in everything from iPhones to office-building construction and its price is sensitive to shifts in demand.
The most actively traded contract, for September delivery, was recently down $0.215, or 0.5%, at $4.3915 a pound on the COMEX division of the New York Mercantile Exchange.
Thinly traded July-delivery copper was down $0.25, or 0.6%, at $4.3800 a pound.
The cost of default insurance for Italian, Spanish, Irish, Portuguese and Greek government bonds has shot higher ahead of an emergency summit of euro-zone leaders set for Thursday. The euro-zone leaders are due to discuss a new Greek bailout agreement.
Investors are skittish about putting their wealth into assets like copper, which is sensitive to economic growth, amid an uncertain outlook for a major consumption hub like Europe.
Meanwhile, the U.S. is no closer to a deal to raise the nation's $14.3 trillion borrowing limit. The White House and Republican Party leaders must reach an accord by Aug. 2 or risk missing payments on some of the debt.
"While extremely unlikely, [the prospect of a default] has nevertheless added another layer of confusion to an already uncertain and nervous market," Leon Westgate, base metals analyst at Standard Bank, wrote in a note to clients.
A stronger dollar, which rallied versus the euro, is also keeping copper futures subdued. The euro was recently at $1.4077, down from $1.4150 late Friday in New York.
Copper futures are denominated in dollars and appear more expensive to traders using foreign currencies when the greenback rallies.