SHANGHAI, May 12 -- Copper and aluminum slumped for a second day as metals dropped on speculation demand will slow should China, the biggest user, raise interest rates to cool inflation, and as sovereign debt threatens growth in Europe.
Three-month delivery copper on the London Metal Exchange slumped as much as 2 percent to $6,911 a metric ton before trading at $6,920 a ton at 2:04 p.m. in Shanghai. Aluminum fell 1.7 percent to $2,069 a ton. Lead, nickel and zinc declined.
Property prices in China advanced at a record pace in April, consumer prices climbed at the fastest rate in 18 months and new lending exceeded the forecasts of all 24 economists surveyed, figures showed yesterday. China's benchmark equity index declined on concern the government will raise borrowing costs and unveil more measures to curb housing prices.
"It seems copper and metals are in a serious downturn with pressure mounting from China's policy front and with ongoing risks in Europe," Chen Jian, an analyst at Minmetals Haiqin Futures Co., said from Beijing.
Chinese equities extended losses after entering a bear market. The tumble cut the premium on yuan-denominated stocks to the lowest level in 3 1/2 years, a sign local investors are too pessimistic, according to Oberweis Asset Management Inc.
Shanghai will impose a series of regulations, including residential property taxes, to curb real-estate prices in China's financial hub as early as this month, the Shanghai Securities News reported today, citing unidentified people close to the government. China has raised mortgage rates, barred lending for third-home purchases and ordered tighter scrutiny of developers' financing to restrain property prices.
"Market confidence was pretty shaken," Li Peiying, an analyst at Essence Futures Co., said from Beijing. "Consumer demand appears to remain healthy, yet investment demand may plunge in the short term."
Copper also dropped as a stronger dollar reduced the investment appeal of commodities priced in the currency. The dollar strengthened for a second day against six major currencies as investors sought a refuge to protect their wealth.
The Reuters/Jefferies CRB Index of 19 raw materials has slumped 4.6 percent this month on concern that sovereign debt risks in Europe may slow the region's economic recovery.
Copper for August delivery in Shanghai was little changed at 55,680 yuan a ton after dropping 0.3 percent earlier.
Lead decreased 1.7 percent to $2,015 a ton and nickel retreated 1.7 percent to $22,200 a ton. Zinc fell 0.9 percent to $2,051 a ton and tin dropped 0.3 percent to $17,475 a ton.