Forexpros – Copper futures fell to the lowest level since mid-January in early European trade on Monday, as mounting fears over Spain’s debt woes and disappointing Chinese economic growth data added to worries over the global economic outlook.
On the Comex division of the New York Mercantile Exchange, copper futures for May delivery traded at USD3.590 a pound during European morning trade, tumbling 1%.
It earlier fell by as much as 1.5% to trade at USD3.569, the lowest since January 12.
The cost of insuring Spanish government debt against default rose to an all-time high on Friday, after a report showed that Spain’s banks borrowed a record amount from the European Central Bank in March, underlining concerns about the health of the sector.
Spanish 10-year yields rose above the key 6.0%-level in early trade Monday, hitting 6.15%, the highest since December 1. Similar-maturity Italian yields increased to 5.66%, while Portuguese yields climbed to 12.73%.
There have been renewed concerns of further debt contagion in the euro zone in recent weeks amid fears Spain will be the next in the euro zone to require a bailout.
Market sentiment looked set to remain fragile ahead of an auction of two and 10-year Spanish governments bonds later in the week, which is being seen as a key test of market appetite for the country’s debt.
Europe as a region is second in global demand for the industrial metal. Prices have tracked investor sentiment toward the euro zone’s debt crisis in recent months.
Also weighing on appetite for riskier assets were Chinese growth figures released on Friday, showing that the Chinese economy grew at the slowest pace in almost three years in the first quarter.
A deeper slowdown in China would impair a global expansion that is already faltering because of the implementation of harsh austerity measures in Europe.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
According to trade data released last week, China’s imports of copper in March fell 4.6% to 462,182 metric tons from 484,569 metric tons the previous month, underling concerns over a slowdown in demand.
Copper is regarded as a leading indicator of the global economy. The industrial metal is sensitive to the economic growth outlook because of its widespread uses across industries.
A stronger U.S. dollar also weighed, with the dollar index gaining 0.3% to trade at 80.27, the highest since April 5.
Meanwhile, the CME Group, which is the operator of the Comex, said late Friday that it will cut margins for copper futures effective after the close of business on April 16.
The amount that speculators must keep on deposit for an initial account in copper futures was lowered to USD5,400 from USD6,750.
Elsewhere on the Comex, gold for June delivery declined 0.8% to trade at USD1,646.75 a troy ounce, while silver for May delivery shed 0.5% to trade at USD31.23 a troy ounce.
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