Mar 12, 2012 NEW YORK (Dow Jones)--Copper futures snapped a three-day rally to end lower Monday, as China's surprise February trade deficit sapped investor confidence in growth-sensitive assets like commodities.
The most actively traded contract, for May delivery, settled down 2.10 cents, or 0.5%, at $3.8375 a pound on the Comex division of the New York Mercantile Exchange.
Copper's declines came after China, the world's largest consumer of the industrial metal, reported a trade deficit of $31.48 billion in February, the country's largest monthly deficit in Dow Jones data dating back to 2000. The data was a shift from a $27.28 billion surplus in January, and comes after a string of surpluses. February's deficit was attributed to seasonal distortions and faltering demand for the country's exports.
Other commodities also lost ground on the Chinese news, with crude oil and gold both lower on the day. In the wake of the 2008 financial crisis, China was seen as the world's economic engine as the U.S. recovery struggled to find traction while Europe was mired in sovereign-debt problems. With the latest trade data clouding this view, investors grew more cautious, choosing to pare their exposure to assets that bank on growth.
"Copper is a good economic indicator so if there's concern about China's growth slowing that's going to definitely impact the copper market," said Frank Cholly, senior commodities broker at RJO Futures.
Copper's losses were muted as traders weighed China's stronger copper imports against the trade-deficit report. China's copper and copper product imports rose 17% in February from the prior month and, at 484,569 metric tons, were nearly double the volume imported the same month last year.
"Certainly it is normal for cathode inventory to build at this time of year and because the level of Chinese demand is higher the amount of inventory needed for the market to function efficiently has also gone up," said Gayle Berry, a metals analyst with Barclays Capital, in a report.
Copper settlements (ranges include electronic and pit trading):
Mar $3.8315; down 2.10 cents; Range $3.8175-$3.8545
May $3.8375; down 2.10 cents; Range $3.8170-$3.8650