By Tatyana Shumsky
Copper prices fell on Tuesday, after fresh losses in Chinese
stocks spurred fears of wider economic problems in China, the
world's top consumer of industrial metals.
The most actively traded contract, for September delivery, was
recently down 10.30 cents, or 4.1%, at $2.4350 a pound on the Comex
division of the New York Mercantile Exchange.
Copper prices have tumbled in recent weeks on signs that
economic growth in China remained lackluster despite government
efforts to boost business activity. Copper is widely used in
manufacturing and construction, two sectors of China's economy that
have struggled to make headway in recent months. Speculative
investors have been net-bearish on Comex copper futures for
four-consecutive weeks on concerns about weaker demand for the
metal.
"China is 40% of consumption, and with concerns about their
growth moving forward, that's keeping copper under pressure," said
Dave Meger, head of metals trading at High Ridge Futures in
Chicago.
On Tuesday, fresh losses in China's stock market intensified
selling in copper futures, pushing prices to $2.4280 a pound, the
lowest level since Jan. 29. The Shanghai Composite Index closed
down 1.3% at 3727.12.
China's "stock market has become extremely volatile and growth
is at its lowest in a decade," analysts at Barclays said in a note
to clients. "If there is hope for commodities on the demand side,
then it probably comes from the potential for the Chinese
government to step up commodity-intensive infrastructure
development to support growth," they said.
Some investors worry that Chinese authorities won't do enough to
prevent stock-market losses from spreading into the wider economy.
Many Chinese have ploughed their savings into stocks and have also
taken out loans to invest additional funds in the market. As
China's equities market tumbles, copper traders worry that those
losses will translate into personal and financial company
bankruptcies that will hurt China's overall economy.
A stronger dollar, which rallied against other currencies, also
weighed on copper prices. Copper is traded in dollars and becomes
more expensive for buyers who use weaker currencies to fund their
purchases. The WSJ Dollar Index was recently up 0.7% at 87.90.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com
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