By Amrith Ramkumar 

Copper prices have erased nearly all of their gains for the year and are on the brink of entering correction territory, a signal that some investors are still wagering on a continued growth slowdown overseas.

An industrial metal heavily used in construction and manufacturing, copper is closely tied to the health of the world economy because shifts in global growth tend to swing demand. Prices surged to start the year amid optimism the U.S. and China would soon resolve their trade fight but have slid in recent days, with many analysts wary that escalating tariffs will crimp economic activity.

Those worries have also hurt shares of multinational industrial companies and chip makers reliant on Chinese demand for their products, though optimism about U.S. economic growth has kept U.S. stocks relatively steady. That faith hasn't helped copper much, because China -- the world's second-largest economy -- accounts for about half of global demand.

Prices fell in four consecutive sessions through Wednesday to their lowest level since late January and edged higher Thursday. They are almost 10% below their April peak, putting the metal near correction territory, and now up just 2.2% for the year.

The latest drop has followed the U.S. raising tariffs on roughly $200 billion of Chinese imports and releasing plans to levy duties on a further $300 billion in imports. Beijing has said it plans to lift duties on about $60 billion of U.S. imports starting June 1.

At the same time, President Trump has hinted that tariffs could be removed if the two sides reach a deal, and some analysts expect China to increase stimulus efforts to spur growth.

Updates on trade "will probably be a seesaw for the next couple of weeks at least, if not even longer," said George Mateyo, chief investment officer at Key Private Bank.

In a sign of growing investor concern about global growth, hedge funds and other speculative investors have steadily lifted bearish bets on copper in recent weeks. That trend has pushed the difference between bullish bets and bearish ones to its lowest level since late January, according to Commodity Futures Trading Commission data through May 14. The latest figures for the week ended Tuesday are scheduled to be released later Friday.

Analysts are also looking ahead to coming overseas economic-data releases to gauge the impact of higher U.S. tariffs on Chinese imports that took effect earlier this month. Figures showed Chinese factory activity slowed sharply in April after a rebound in March, and data Thursday showed the European economy cooling after a strong start to 2019.

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Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

May 24, 2019 08:14 ET (12:14 GMT)

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