Forexpros – Copper futures edged lower during European morning trade on Tuesday, holding on to mild losses after data showed that German economic sentiment for June turned negative for the first time since January and after Spain saw borrowing costs spike at a well-received bond auction earlier in the day.
Markets continued to monitor political events in Greece, as well as a Group of 20 summit in Mexico and a policy-setting meeting from the Federal Reserve, amid hopes for further easing.
On the Comex division of the New York Mercantile Exchange, copper futures for July delivery traded at USD3.387 a pound during European morning trade, shedding 0.25%.
It earlier fell by as much as 0.5% to trade at a session low of USD3.373 a pound.
Copper futures held on to losses after data showed that the ZEW index of economic sentiment in Germany tumbled to minus 16.9 in June from 10.8 the previous month, while the index for economic sentiment in the euro zone declined to minus 20.1 from a reading of minus 2.4 in May.
Spain’s deteriorating fiscal health remained in focus. Spain’s Treasury sold EUR2.4 billion worth of 12-month government bonds at an average yield of 5.07% earlier in the day, up sharply from 2.98% at a similar auction last month.
Spain also sold EUR64 million of 18-month debt at an average yield of 5.10%, up from 3.30% at a similar auction last month. The bid-to-cover ratio stood at 4.40, compared to 3.23 at an auction in May.
In total, Spain’s Treasury sold EUR3.04 billion of government debt, above the full targeted amount of EUR3 billion, but it had to pay a hefty price.
Reports surfaced earlier in the day that the full audit of the Spanish banks has been delayed from July to September, fuelling fears that the banks may need more funds than originally thought.
The yield on Spanish 10-year bonds eased to 7.03% following the auction, down from 7.17% before the results. Yields hit a record high 7.28% on Monday.
The 7% threshold is widely considered unsustainable in the long run and is the level at which Greece, Ireland and Portugal were forced to seek international bailouts.
Meanwhile, markets continued to monitor political developments in Greece, amid hopes that Greece’s pro-bailout New Democracy party will form a coalition government with the socialist Pasok party, which would allow Athens to resume negotiations with its creditors on its international bailout deal.
Bloomberg reported earlier in the day that Greek political leaders may seek relief from austerity measures, citing a Pasok party official who declined to be identified.
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.
Investors now awaited the outcome of a Group of 20 summit in Mexico, amid hopes it could produce fresh measures to combat the crisis in Europe.
In a statement, G-20 leaders said they will “take the necessary actions” to strengthen the global economy, and if growth weakens substantially, countries without heavy debt loads stand ready to stimulate their economies, according to a draft communiqu? from the summit.
Markets were also eying the start of a two-day Federal Reserve policy-setting meeting, amid growing speculation the central bank will move to stimulate growth in the world’s largest economy.
A growing number of Fed watchers expect the central bank to extend its Operation Twist program, in which it sells short-term bonds to buy long-term ones. The current USD400 billion Twist program is set to expire at the end of June.
Copper prices have been on a rapid decline since the start of May, losing nearly 12% amid growing fears over an escalating debt crisis in the euro zone and a deeper-than-expected slowdown in China.
A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of debt crisis in the euro zone.
Elsewhere on the Comex, gold for August delivery eased up 0.2% to trade at USD1,630.15 a troy ounce, while silver for July delivery added 0.3% to trade at USD28.75 a troy ounce.
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