September 29, 2011

THERE'S ONLY ONE SAFE HARBOR:

Copper Fall Hints At Broader Pains (JERRY A. DICOLO, MATT DAY and JONATHAN CHENG, 9/29/11, WSJ)

For a start, copper has been on a powerful bull run since finding its nadir in 2008. Prices had tripled through February of this year, and they hovered near those highs until the recent rout.

As copper began to decline, hedge funds and other speculators bailed out. Data from the Commodity Futures Trading Commission show that, in late August, speculative investors had more bets copper would fall than rise for the first time since September 2009.

And, as global markets slumped last week, some fund managers were likely closing out their remaining bullish bets, said David Wilson, head of metals research at Société Générale SA.

"A lot of the big commodity hedge funds hadn't really been involved in the metals markets since April. The weak economic backdrop has created an environment where they are considering 'shorting,' " he said.

Many are also looking at China, which accounted for 40% of world refined copper consumption last year.

Copper imports in China this year were down 26% from year-ago levels, China's General Administration of Customs said last week.

That follows HSBC's preliminary gauge of Chinese manufacturing, which showed shrinking industrial activity for a third consecutive month in September.

Additionally, copper prices in China are falling toward the world benchmark set in London. The difference between the two is the smallest since May, indicating China's appetite is waning.


Posted by at September 29, 2011 7:03 AM
  

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