Tags: industrial | metals | copper | Fed

Industrial Metals Decline in Worst Start to a Year Since 2010

Thursday, 30 Jan 2014 09:58 AM

Industrial metals fell in the worst start to a year since 2010 after manufacturing contracted in China, the biggest consumer, and as the Federal Reserve slowed U.S. economic stimulus. Aluminum dropped to a four-year low.

A Chinese factory gauge from HSBC Holdings Plc and Markit Economics Ltd. showed a final January reading of 49.5, below the level of 50 separating expansion and shrinkage. The Fed said yesterday its monthly bond-buying will fall by another $10 billion. Last month’s initial reduction of stimulus triggered drops by emerging-market currencies and equities.

“The turmoil in emerging markets has hit sentiment hard just as prices were trying to cope with weaker data out of China,” said Mark Newson-Smith, head of sales at Xconnect Trading Ltd. in London.

Aluminum for delivery in three months slid 0.8 percent to $1,729 a metric ton by 12:28 a.m. on the London Metal Exchange after touching $1,726.75, the lowest since July 2009. The LME Index of six main industrial metals is down 2.7 percent this month, the worst start to a year since 2010. Chinese financial markets will shut for a week starting tomorrow as the nation celebrates the Lunar New Year.

“The coming Chinese New Year has reduced volumes and coincided with more withdrawal of liquidity from the Fed,” Newson-Smith said.

Turkey, South Africa and India raised interest rates this week to support their currencies. The MSCI Emerging Markets Index retreated 2 percent this week. Less stimulus “eventually is likely to raise the cost of money, and that could have a big impact on the viability of financing deals, which could hit aluminum, zinc, nickel and possibly even copper,” said William Adams, an analyst at FastMarkets.com in London.

Contango

Financing transactions involve buying metal for nearby delivery while making a forward sale to benefit from a market in contango, when prices rise for future delivery.

Copper for delivery in March fell 0.2 percent to $3.234 a pound on the Comex in New York. The metal for delivery in three months declined 0.2 percent to $7,120 a ton in London, poised for a seventh daily retreat, the longest since September 2011, and a 3.3 percent monthly drop.

Zinc slid for a seventh day in London, the longest losing streak since October 2012. Nickel declined for a sixth day, the lengthiest run of losses since Nov. 12. Tin and lead fell.

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Industrial metals fell in the worst start to a year since 2010 after manufacturing contracted in China, the biggest consumer, and as the Federal Reserve slowed U.S. economic stimulus.
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2014-58-30
Thursday, 30 Jan 2014 09:58 AM
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