Forexpros – Copper futures fell sharply on Wednesday, as concerns over the sovereign debt crisis in the euro zone lingered after a meeting of euro zone leaders failed to reassure markets.
On the Comex division of the New York Mercantile Exchange, copper futures for March delivery traded at USD3.326 a pound during European morning trade, tumbling 1.9%.
It earlier fell by as much as 2.5% to trade at USD3.316 a pound, the lowest price since November 25.
Euro zone finance ministers announced late Tuesday that they had agreed on terms for options to expand the European Financial Stability Facility, the region’s bailout fund.
However, markets were disappointed after they said its capacity to assist indebted nations would not be as large as initially hoped.
Adding to nervousness over the region’s debt crisis, the Guardian Newspaper reported that euro zone finance ministers were warned during Tuesday’s meeting that Italy was at risk of insolvency, with a potential devastating impact on the region’s core economies of Germany and France.
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 weeks.
Sentiment was also weighed after ratings agency Standard & Poor’s downgraded its ratings on 15 major global lenders on Tuesday, underlining concerns over the health of the global banking system.
The downbeat news boosted demand for the safe haven U.S. dollar, with the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, gaining 0.31% to trade at 79.39.
A stronger dollar reduces the appeal of raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Meanwhile, Wall Street investment bank Morgan Stanley said in a report published Tuesday that industrial commodities, such as copper have limited potential for gains in 2012, as the global economy faces a “myriad of headwinds” and risk aversion buoys the dollar.
Elsewhere on the Comex, gold for February delivery fell 0.45% to trade at USD1,710.95 a troy ounce, while silver for March delivery dropped 1.6% to trade at USD31.42 a troy ounce.
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