Forexpros – Copper futures fell to a four-week low during European morning hours on Monday, as fears that the euro zone’s sovereign debt crisis was worsening prompted investors to shun riskier assets.
Persistent worries about China’s economic slowdown and the uneven recovery in the U.S. also weighed on appetite for growth-linked assets.
On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at USD3.350 a pound during European morning trade, plunging 2.85%.
It earlier fell by as much as 3% to trade at USD3.347 a pound, the lowest since June 29.
Concerns that Spain may require a full bailout mounted after the state of Murcia followed Valencia in requesting financial aid from Madrid over the weekend.
Spanish media reported that several others among Spain’s 17 semi-autonomous regions are expected to follow, including the two biggest regions, Catalonia and Andalucia.
Adding to the gloom, the Bank of Spain forecast that the nation’s economy shrank 0.4% in the second quarter of 2012, a deeper contraction than the 0.3% recorded in the first three months of the year.
The yield on Spanish 10-year bonds rose to a record 7.57% Monday, well above the critical 7% threshold widely considered unsustainable in the long run.
In addition, fears over a Greek exit from the euro zone resurfaced, as Athens requested more time to meet the conditions of its international bailout ahead of a meeting with the Troika on Tuesday.
German media reported over the weekend that the International Monetary Fund may cut off aid to Greece, making the country’s insolvency in September more likely.
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.
The news prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the dollar and U.S. Treasuries.
The euro sunk to the lowest level since June 2010 against the U.S. dollar, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.35% to trade at 83.91, just below the highest level since July 2010.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Elsewhere, concerns over weakening demand from China also hit the industrial metal.
Song Guoqing, a member of the People’s Bank of China monetary policy committee said earlier that China’s economic expansion may cool for a seventh straight quarter to 7.4% in the three months to September.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
The comments followed government data released earlier in July showing China’s second quarter economic growth slowed to a three-year low of 7.6% from a year earlier, compared to 8.1% in the first quarter.
Elsewhere on the Comex, gold for August delivery fell 0.75% to trade at USD1,570.85 a troy ounce, while silver for September delivery dropped 1.65% to trade at USD26.85 a troy ounce.
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