RTRS: Shanghai copper hits 1-week low on debt woes, dollar
By Manolo Serapio Jr.
MANILA (Reuters) - Shanghai copper fell to one-week lows on Wednesday and London futures dropped for a fifth day running as investors trimmed positions in riskier assets and pushed the dollar higher on rising sovereign debt troubles.
Fitch Ratings cut Greece's debt to BBB+ with a negative outlook while Moody's downgraded six Dubai-linked issuers on Tuesday after concluding that no "meaningful" government support would be provided to top firms such as DP World.
The Greece news sent the euro skidding to a one-month low against the dollar, and fuelled a sell-off in equities and commodities.
Adding to the gloom, revised data showed Japan's economy grew just 0.3 percent in the third quarter versus an initial estimate of 1.2 percent on slow capital spending.
"The base metals complex is lacking direction for the next convincing break, and in the absence of any significant changes to the fundamentals, the markets are drifting on the back of macro news, concerns about certain sovereign debt position and the dollar as well," said Yingxi Yu, an analyst at Barclays Capital in Singapore.
Three-month copper on the London Metal Exchange dropped $40 to $6,940 a tonne by 0253 GMT, stretching losses from the previous session after hitting their highest in more than 14 months last week.
Shanghai's benchmark third month copper fell 610 yuan to 54,990 yuan a tonne. The most active fourth month contract slipped 690 yuan to 55,150 yuan.
Despite Wednesday's dip, copper prices are still up as much as 130 percent this year, driven by Chinese buying, a struggling dollar and investment money betting on a pickup in demand next year.
"I think the market needs a significant correction towards the end of the year. Most investors in China also need to cut long positions," said a trader based in Shanghai, adding that LME copper would find strong buying interest when it drops to around $6,500.
"Most investors are still quite positive on the prospects for next year, so the selling pressure into the year-end would be quite limited," said Barclays' Yu.
Oher base metals also edged lower with three-month LME aluminium down $25, to $2,138 a tonne.
The metal touched a 13-month peak of $2,190 a tonne on Tuesday, buoyed by rising physical premiums in parts of Europe, even as LME inventories stand near record levels at 4.59 million tonnes.
"We believe the global aluminium market is not in a deficit, but the current physical market is tight in some regions because the bulk of LME warehouse inventories are tied up in financing deals and therefore are not readily available," Barclays' Yu said.
