Oct 31, 2011 LONDON (Dow Jones)--Copper closed 2.4% lower on the London Metal Exchange Monday as the euro continued to sink against the dollar and investors fretted over a lack of details in the plan to tackle Europe's sovereign debt crisis.
Base metal prices came under pressure amid a commodity-wide pullback, triggered by a rally in the dollar after Japan intervened in the currency markets to weaken the yen against the greenback. The metal markets are priced in dollars, and subsequently tend to trade with an inverse correlation to the U.S. currency.
The copper price was also hit by "fears of stagnation in Europe," said CMC Markets analyst Michael Hewson.
Analysts said investors are worried by the lack of clarity on the euro-zone debt deal, while concerns over the state of the European economy were exacerbated by a disappointing Belgian sovereign-bond auction. Belgium's funding costs rose at a bond auction Monday versus previous respective tenders, while demand declined, reflecting investors' unease over banking issues following the move to nationalize Dexia Bank Belgium.
Yields on Italian debt were also approaching levels last seen in August, with the yield on 10-year Italian debt at 6.10% in the middle of afternoon trade in Europe, up from 5.97% late Friday, according to CQG.
Base metals tend to be sensitive to economic developments as they have wide industrial applications.
The red metal closed at $7,980 a metric ton, down 2.4%, or $194, on Friday's PM kerb close. At its intraday low, three-month copper was down 3.7% at $7,873.25/ton.
In European stock markets, the Stoxx Europe 600 index fell 2.2% to end at 243.48. Precious metals, crude oil futures and soft commodities had also declined.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Friday PM kerb
Copper 7980.0-7990.0 Dn 194
Lead 2081.5-2082.0 Dn 7.5
Zinc 2000.0-2001.0 Up 16
Aluminum 2217.0-2218.0 Dn 25
Nickel 19575.0-19600.0 Dn 125
Tin 21975.0-22000.0 Dn 100
Aluminum Alloy 2155.0-2160.0 Dn 40
Aluminum Alloy-NASAAC 2285.0-2290.0 Dn 15