Copper Drops for First Day in Six After Greece Credit Rating is Cut

Tuesday, Jun 15, 2010

Copper dropped for the first time in six days, snapping its longest rally in more than five months, on concern that Europe’s debt crisis may worsen after Greece’s credit rating was cut to junk. Aluminum and nickel also declined.

Three-month copper on the London Metal Exchange fell as much as 1.2 percent to $6,580 a metric ton and traded at $6,587 at 1:42 p.m. in Singapore. The metal yesterday capped its longest gain since the six-day climb ended Jan. 4, on optimism that China’s demand will rise. September-delivery copper in New York dropped as much as 1 percent to $2.9830 a pound. China’s financial markets are closed today and will reopen on June 17.

“Commodities have been bouncing back quite nicely in the past few days and such events do serve as a reminder to people that things are not back to normal,” Yingxi Yu, an analyst at Barclays Capital, said from Singapore. “Bad headlines coming out every now and then will keep markets nervous.”

Moody’s Investors Service yesterday joined Standard & Poor’s cutting Greece’s credit rating to non-investment grade, or junk. In making the four-step downgrade to Ba1, Moody’s cited “substantial” risks to economic growth from the austerity measures tied to a 110 billion-euro ($134.5 billion) aid package from the European Union and the International Monetary Fund.

“It’s really fears about the future, fears about what the European debt crisis will evolve into,” said Yu. “It’s very unlikely that markets can rebound very strongly.”

Copper’s Performance

Copper, seen by some investors as a gauge of economic activity as it is used in construction and transport industries, has fallen 10 percent this year on concern that Europe’s fiscal crisis, which began in Greece, will hamper global growth.

Concerns that Chinese demand may slow after the government took steps to prevent a property bubble drove the metal to an eight-month low of $6,037.50 a ton on June 7. China has raised minimum mortgage rates, restricted pre-sales by developers and tightened controls on purchases of second and third properties in a bid to curb property speculation.

Metals also dropped today as the dollar rebounded against a six-currency basket including the euro and yen before a German report that economists said will show investor confidence dropped to the lowest level in almost a year. Dollar-denominated commodities tend to move inversely to the U.S. currency.

Among other LME-traded metals, aluminum fell 1 percent to $1,975 a ton, zinc declined 1 percent to $1,779.25 a ton and lead shed 0.8 percent to $1,700.75 a ton. Nickel dropped 2.1 percent to $19,882 a ton and tin climbed 0.2 percent to $16,975 a ton.

 

Source: Bloomberg