May 29, 2012 NEW YORK (Dow Jones)--Copper futures finished off their highs after Spain's credit rating was cut, but prices remained in positive territory on optimism that China's new stimulus plans would boost demand.
The most actively traded contract, for July delivery, settled up 1.40 cents, or 0.4%, at $3.4620 a pound on the Comex division of the New York Mercantile Exchange.
China announced plans for a fresh round of economic stimulus overnight through its state news agency Xinhua. The new measures will aim to boost growth by subsidizing purchases of household appliances and cars, while avoiding aggressive investment in infrastructure which was the hallmark of China's 2008 stimulus program, Xinhua said.
Copper futures had rallied to an intraday high of $3.5085 a pound on hopes that China's new growth efforts would boost demand for the industrial metal. China is by far the world's largest copper consumer, accounting for roughly 40% of world demand. Copper is used in electrical wiring and tubing by both general and automotive manufacturing, and could benefit from the program.
However, prices retreated from earlier gains after credit ratings firm Eagan Jones slashed Spain's rating to B from BB-. The decision pushed Spain's debt further into junk status and hammered on investor worries that Europe's debt crisis is spreading and getting worse.
"Late session euro weakness brought a fresh bout of selling interest to the base metals complex," said traders with RBC Capital markets.
The euro dropped below $1.25 following the rating cut, adding to the negative tone in commodity markets. Copper is priced in dollars and is more expensive for investors using other currencies when the greenback rallies.
Copper settlements (ranges include electronic and pit trading):
May $3.4635; up 1.55 cents; Range $3.4620-$3.4945
Jul $3.4620; up 1.40 cents; Range $3.4485-$3.5085