Tue Nov 1, 2011 7:45pm GMT
* Greek referendum decision rattles risk assets
* Base metals off as global PMIs slow in October
* Strike-hit Grasberg mine limits copper losses
* Coming up: Federal Reserve policy-setting meeting/statement Wed
By Chris Kelly and Susan Thomas
NEW YORK/LONDON, Nov 1 (Reuters) – Copper fell for a second day on Tuesday as a deal to rescue Greece and prevent a wider sovereign debt crisis hit a new roadblock and as softer Chinese data clouded prospects for demand from the top metal consumer.
Metals bore the brunt of further risk aversion, with aluminium , zinc , nickel and lead sinking more than 4 percent as
investors flocked to assets seen to be safer, such as the dollar, after Greece’s shock decision to hold a referendum on its euro zone bailout. The bearish assault gathered momentum after data from several key metal-consuming countries showed slowing manufacturing growth in October and reverberations from Monday’s bankruptcy filing by futures brokerage MF Global Holdings Ltd sapped broader market confidence. Sentiment has turned bearish as the euphoria last week from Europe’s initiatives to tackle its debt problems faded and the growth concerns that were supposed to be addressed remained well in place after the Greek decision, analysts said.
“Even if Greece is off the table and this referendum passes, it doesn’t resolve any of Europe’s broader issues, i.e., the rest of the PIGS countries are broke,” said Adam Sarhan, chief executive of New York-based Sarhan Capital, using an acronym for Portugal, Italy, Greece and Spain.
“That is the underlying problem which is weighing on the markets collectively, from copper to equities … Nothing that was addressed last week even scratches the surface dealing with their debt.”
London Metal Exchange (LME) three-month copper sank $270 or 3.4 percent to close at $7,730 a tonne.
In New York, the key December COMEX contract settled down 12.95 cents or nearly 3.6 percent at $3.5025 per lb, near the bottom of its $3.4620 to $3.6570 session range. Futures volumes stood above 58,000 lots late in New York, about 10 percent below their 30-day norm, according to preliminary Thomson Reuters data. Europe’s economic troubles were evident in a series of manufacturing reports from China, Britain and the United States — all showing slower rates of expansion. A glimmer of good news was seen within the U.S. data, as the new orders component of the index rose to its highest since April.
“U.S. construction PMIs are not that bad (for copper) … New orders are quite good, it means among all this bad news there is a silver lining,” analyst Andrey Kryuchenkov of VTB Capital said.
LAYER OF UNCERTAINTY
Adding to worries about companies’ exposure to the euro zone crisis, MF Global filed for bankruptcy protection after bad bets on debt from the currency bloc. However, the impact of MF Global’s bankruptcy filing, while an added negative, was minimal, one trader said. “Metals markets are under a lot of pressure, mostly because of the euro zone and MF Global has added another layer of uncertainty,” one LME floor broker said. “Clients are spending their time wondering how to get out of their positions.”
On Monday, London clearing house LCH.Clearnet declared MF Global in default, and the LME suspended the brokerage from trading. Limiting copper’s losses, Freeport-McMoRan Copper & Gold Inc said on Tuesday that production and processing rates at its strike-hit Grasberg mine in Indonesia have fallen below levels needed to meet fourth-quarter sales targets. Also helping the metal was data showing copper inventories fell for the ninth session in a row, losing 4,625 tonnes on Monday to 424,750 tonnes — their lowest levels since early March and down more than 10 percent over the past month.
Metal Prices at 1904 GMT
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
COMEX Cu 350.75 -12.45 -3.43 444.70 -21.13
LME Alum 2111.00 -109.00 -4.91 2470.00 -14.53
LME Cu 7730.00 -270.00 -3.38 9600.00 -19.48
LME Lead 1982.00 -100.00 -4.80 2550.00 -22.27
LME Nickel 18600.00 -975.00 -4.98 24750.00 -24.85
LME Tin 21750.00 -250.00 -1.14 26900.00 -19.14
LME Zinc 1913.00 -87.00 -4.35 2454.00 -22.05
SHFE Alu 16340.00 -40.00 -0.24 16840.00 -2.97
SHFE Cu* 57710.00 -520.00 -0.89 71850.00 -19.68
SHFE Zin 15305.00 -30.00 -0.20 19475.00 -21.41
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07