Moves were exaggerated by a lack of liquidity due to the closure of the London Metal Exchange. The most-traded July copper contract on the Shanghai Futures Exchange fell more than 2 percent to 53,600 yuan ($8,600) a tonne, its lowest since June 27, before closing at 53,740 a tonne. In New York, the most active COMEX copper contract for delivery in May dropped 0.8 percent to settle at $3.3745 per lb, after falling to its weakest level since early August.
US data showing factory activity in March grew less than economists had expected also knocked Wall Street and the US dollar lower. “The break lower today put the market in the area to retest $3.32. That’s the range traders are looking for,” said a US dealer citing macroeconomic data as the reason for the pressure.
Prices fell by 7 percent in the first quarter as fears of another flare up in Europe’s debt crisis from Cyprus’ banking woes offset tentative signs of an improving US economy. Returning from a long holiday weekend, US traders were disappointed by a mixed batch of US manufacturing and construction data that interrupted a run of generally upbeat economic reports. Weaker-than-expected Chinese manufacturing numbers also raised concerns about slowing demand from the world’s No 1 consumer.
The Institute of Supply Management (ISM) report suggested the pace of expansion in the US manufacturing sector unexpectedly slowed in March as the rate of new orders dropped. A rebound in construction spending in February, however, offered another sign of faster growth in the first quarter. Overnight, China’s official manufacturing purchasing managers’ index (PMI) released by the National Bureau of Statistics rose to an 11-month high of 50.9 in March, above the 50-point level that indicates growth on the month, but below a Reuters poll consensus forecast of 52.0. The country accounts for 40 percent of global refined copper demand.
With prices close to being technically oversold on a Relative Strength Index (RSI) and hedge funds and other speculators holding their largest bearish bet in the metal in over a year, the market could be vulnerable to a short covering rally, dealers said. The market could take its next cue from key nonfarm payrolls report due on Friday. London Metal Exchange markets remained shut for a second day on Monday.
Also hurting sentiment towards metals were fresh curbs on China’s red hot property sector, traders said, although they were less stringent than feared. Property speculators typically make up a large percentage of copper’s import demand as they import metal, sell it on the domestic market and use the proceeds for higher yielding investments. Beijing, Shanghai and another major city in China’s south-west will implement strict property cooling measures as part of a central government crackdown on the overheated property market, state news agency Xinhua has said. Reflecting some bargain hunting, the premium for front month copper on ShFE ended at 110 against the rolling third month, close to its highest since late October.