BASE METALS: NY Copper Snaps Selloff As Traders See Bargain
September 26 2011 - 2:56PM
Dow Jones News
Copper carved out slight gains Monday as some investors viewed
the market's steep two-day slide to 14-month lows as a good
opportunity to buy, and stronger equities lifted sentiment.
The most actively traded copper contract, for December delivery,
rose 0.3 cent to settle at $3.283 a pound on the Comex division of
the New York Mercantile Exchange.
Futures plummeted 13% during the previous two sessions, as
worries about a slowdown in global growth and instability in
Europe's financial system rattled industrial commodities.
The metal fell victim to a risk-off trade in which investors
dumped assets seen as risks should the global economy stumble, said
Matt Zeman, head of trading with Kingsview Financial.
But U.S. equity indexes edged higher Monday on hopes for
coordinated action to address Europe's debt crisis. Major European
markets also ended the day with gains, providing a lift to the
battered copper market. Industrial bellwether crude oil also
rose.
Speculative investors, who as recently as July had been
overwhelmingly bullish on the prospects for copper, began to bet
that demand for industrial metals in particular would fall as the
European and U.S. economies struggle. Worries mounted in recent
weeks that Europe would be unable to prevent a default-spurred
credit crunch, and downbeat economic outlooks by the Federal
Reserve and International Monetary Fund last week pressured
growth-sensitive assets.
"These are not markets for the faint of heart," traders at RBC
Capital Markets said in a note. "Whether this is finally the bottom
we've all been looking for remains to be seen."
Copper is vulnerable to such shifts in economic sentiment
because of its widespread uses across industries, from housing and
auto manufacturing to consumer electronics, and the metal can track
equities markets as a proxy for investors' view of the economy.
CME Group Inc. (CME), operator of the Comex, said Friday it
would increase collateral requirements to trade benchmark copper
futures by 18%. The increase takes effect at the close of business
Monday, the exchange operator said.
Following the change, speculative investors will be required to
post $6,750 to open a futures contract and $5,000 to hold it
overnight.
Copper settlements (ranges include electronic and pit trading):
Sept. $3.2750; up 0.3 cent; Range $3.1800-$3.3035
Dec. $3.2830; up 0.3 cent; Range $3.0715-$3.3565
-By Matt Day, Dow Jones Newswires; 212-416-4986;
matt.day@dowjones.com
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