BASE METALS: Copper At 4-Week Low On Growth, Contagion Worries

Aug 03, 2011 (Dow Jones Commodities News via Comtex) -- --Comex September copper ends at a four-week low, down 6.90 cents, or 1.6%, at $4.3260/lb.

--Weak U.S. growth prospects hammer equities, pressure copper futures

--Worries about euro-zone contagion add to negative tone

By Tatyana Shumsky
   Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Copper prices fell amid pessimism over slow economic growth in the U.S. and concerns that Europe's debt problems are spreading to larger euro-zone economies.

The most actively traded contract, for September delivery, settled 6.90 cents, or 1.6%, lower at $4.3260 a pound on the Comex division of the New York Mercantile Exchange.

Thinly traded August-delivery copper fell 6.90 cents, or 1.6%, to settle at $4.3200 a pound.

Copper prices followed equity markets lower as trader sentiment towards the U.S. economy continued to sour in the wake of a tenuous agreement to raise the national borrowing limit. While U.S. lawmakers have avoided a government debt default there are lingering fears economic growth will slow even further if America loses its AAA credit rating.

"Copper as a market is at the mercy of equities, it's losing sentiment on the global slowdown worries. Traders don't think you're going to see any economic growth," said Adam Klopfenstein, a senior market strategist with MF Global.

Orders for U.S. factory goods fell for the second time in three months, a government report said, adding to general market malaise. Copper is widely used in manufacturing everything from iPhones to cars and air conditioners and demand for the metal tends to wane when factory activity slows.

Meanwhile, private sector employment in the U.S. showed a meager uptick in July, according to payroll processing company Automatic Data Processing Inc. Businesses added 114,000 jobs last month, outpacing the 105,000 increase forecast by economists.

The slightly positive data did little to stem copper's losses as traders braced for the official jobs report, due out from the U.S. Labor Department Friday.

"I think people are throwing in the towel ahead of Friday's payroll numbers," Klopfenstein said.

Italian and Spanish government bond prices have slumped this week amid growing fears that Europe's sovereign debt problems are spreading to economies too large to be rescued by the existing euro-zone bailout fund.

The European Union is a major area of copper consumption, often second behind top copper consumer China, and escalating concern that a government debt default will destabilize this economic bloc is pressuring copper futures lower.

"If you don't see a recovery in Europe, obviously commodity demand is going to be soft," said Rob Kurzatkowski, senior commodity analyst with optionsXpress.

Hopes that a 13-day-old strike at the world's largest copper mine will come to an end following today's talks between union leaders and company management added to negative market tone. The Escondida mine in northern Chile accounts for about 7% of global copper supply and has been loosing around 3,000 metric tons of copper output per day since workers downed tools.

Copper settlements (ranges include electronic and pit trading):
Aug $4.3200; down 6.90 cents; Range $4.3200-$4.3880
Sep $4.3260; down 6.90 cents; Range $4.3205-$4.4035