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Comex copper down sharply, in hand with U.S. stocks

NEW YORK: Heavy selling by brokerages sank Comex May copper futures to eight-month lows on Friday as steep drops in U.S. stock prices weighed on sentiment in base metal markets, traders and analysts said.

"Copper is just sinking with the stock market, it's a very old play," Pioneer Futures analyst Scott Meyers said. "It's an industrial metal, industrials are getting hit today and people are afraid."

Active May copper finished at its lowest close since July 29, down 1.65 cents at 75.35 cents a lb, in a trading range of 75.15 to 77.05 cents. Back-month July shed 1.60 cents to 76.30 and the rest fell 1.30-1.65 cents.

Friday's report of high U.S. consumer prices in March and mounting losses on Dow Jones and Nasdaq indices compounded copper's weak performance this week, leading to steady fund liquidation via brokerages.

The Consumer Price Index -- the broadest gauge of U.S. inflation -- rose 0.7 percent in March in the biggest jump since April 1999.

"Commission house selling has been our day here, pretty much, but we're seeing some light scale-down trade buying," a Comex floor dealer said.

Still, the market's sharply lower prices failed to summon enough speculative and consumer support needed to minimise losses.

William O'Neill, head of futures research at Merrill Lynch said that copper came under pressure from myriad economic fears that are surrounding the equity markets.

"You have a combination of technical vulnerability, poor liquidity right now in the base metals, including copper, stock market plunges and interest rate fears," O'Neill said. "They all serve to extend the recent weakness in copper and the base metals in general."

Friday's session ended lower across the board for all base metals on the London Metals Exchange as well.

LME three months copper futures ended the afternoon kerb at $1,668 a tonne, down $33 or from Thursday's close.

O'Neill said that a broad economic slowdown, with higher interest rates, inflation and a loss of the wealth effect, would likely squeeze demand for copper in used in durable goods manufacture and housing construction.

"Not only is there technical fund selling (in copper), but the hedge funds, who are major bull sponsors of the base metals over the last year are out of the market and moved to the sidelines," O'Neill said.

Traders pegged short-term support in May copper at 75.20 and 74.60 cents a lb while resistance was seen at 76.40 to 76.70 cents.

Final estimated trading volumes for copper reached 17,000 contracts, against Thursday's official totals of 6,941 lots, the Comex said.

The Comex is a division of the New York Mercantile Exchange.-Reuters