Forexpros – Copper futures tumbled to a three-day low on Tuesday, as market sentiment was dented after ratings agency Standard & Poor’s warned it may downgrade the ratings of 15 euro zone countries, included AAA-rated Germany and France.
On the Comex division of the New York Mercantile Exchange, copper futures for March delivery traded at USD3.551 a pound during European morning trade, tumbling 1.8%.
It earlier fell by as much as 2.15% to trade at USD3.525 a pound, the lowest since December 1.
In a statement released late Monday, S&P said that ratings could be cut by one level for triple-A rated countries Germany, Austria, Finland, Netherlands and Luxembourg and flagged a potential two-notch downgrade for France.
The ratings agency added that it plans to announce any ratings changes “as soon as possible” after Friday’s European Union summit.
The announcement came after French President Nicolas Sarkozy and German Chancellor Angela Merkel outlined proposals to enforce stricter budget rules in the euro zone, to be discussed at Friday’s summit.
Europe as a region is second after China in global demand for the industrial metal and worries over its economic growth have kept copper prices under pressure in recent months.
The news prompted investors to shun riskier assets, such as stocks and commodities and flock to the relative safety of the U.S. dollar. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.1% to trade at 78.88.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Copper prices came under additional pressure after the Asian Development Bank warned that Asian economies, including China, face “much greater” downside risks compared with a few months ago, citing Europe’s debt woes and the possibility of a recession in the U.S.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year. The red metal is sensitive to the global economic growth outlook because of its widespread uses across industries.
Elsewhere on the Comex, gold for February delivery dropped 0.6% to trade at USD1,724.45 a troy ounce, while silver for March delivery fell 0.7% to trade at USD32.14 a troy ounce. 
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