Copper slipped on Wednesday as growing concern about the euro zone debt crisis prompted caution in the market ahead of a European Union summit that investors fear could fail to materially tackle the region’s debt troubles.
Three-month copper on the London Metal Exchange (LME) was 0.5 percent lower at $7,320 by 0900 GMT, down from Tuesday’s close of $7,359 a tonne.
The metal is down more than 13 percent so far this quarter and is trading around 4 percent lower for the year to date.
Hopes of the EU summit yielding any solution to the euro zone debt crisis evaporated after German Chancellor Angela Merkel flatly rejected the idea of common euro zone bonds, even though European Council President Herman Van Rompuy on Tuesday put forward the case for them. “There have been negative headlines surrounding the EU summit with Merkel’s comments. It is not really fundamentals that are driving commodity markets at the moment as the macro overlay is putting pressure on prices,” said Robin Bhar, analyst at Societe Generale. “Demand (for base metals) is pretty subdued as we move into the holiday season and I do expect prices to probe the downside. Copper could push below $7,000 a tonne.”
The dollar eased from earlier highs and safe-haven German bonds were steady as markets hold fire ahead of the June 28-29 summit in Brussels. “The EU summit later this week is an event risk ahead of which many market participants are likely to remain on the sidelines,” Credit Suisse analysts said in a note. “Transferring financial risks and powers to the EU level faces significant hurdles. The markets will be closely watching whether EU leaders at the summit are willing to further the discussion on pooling banking supervision and risks before a fiscal union.”
By Harpreet Bhal