Copper Keeps Dropping On More Chinese Bad Data

Copper fell in New York after a house-price slump broadened in China, fueling concern about the demand outlook in the biggest consumer of the metal. Nickel, zinc and lead declined.

New-house prices dropped in 68 of the state-tracked 70 cities in August from July, China’s statistics bureau said today. That was the most since January 2011, when the government changed the way it compiles the data. Real estate accounts for 50 percent of the nation’s copper demand, Goldman Sachs Group Inc. estimates. Metals also slid as the dollar climbed after the Federal Reserve boosted interest-rate estimates.

“The markets are understandably very worried about the outlook for Chinese growth,” Gayle Berry, a metals strategist at Jefferies Bache Ltd. in London, said by phone. “The property market is still looking terrible.”

Copper for December delivery retreated 0.7 percent to $3.123 a pound by 7:40 a.m. on the Comex in New York. The metal for delivery in three months fell 0.7 percent to $6,883 a metric ton on the London Metal Exchange.

“The property market in particular is a real risk for copper, because you haven’t actually seen that have a negative impact on copper yet,” Berry said. “That’s going to come within the next six months or so, because copper is used later on in the construction process.”

Fed policy makers raised their median estimate for the central bank’s key rate to 1.375 percent at the end of 2015 versus June’s forecast for 1.125 percent. The dollar rose as much as 0.3 percent against a 10-currency basket. Gains by the dollar make commodities priced in the currency more expensive in terms of other monies and tend to reduce the appeal of raw materials as an alternative investment.

“The stronger dollar is weighing even more now on the base complex,” RBC Capital Markets Ltd. said in a note. “Macro funds and investors are selling commodities. We see prices retreating down before attracting buying on the dips.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza