Jun 20, 2012 (Dow Jones) NEW YORK--Copper futures fell Wednesday on disappointment over the Federal Reserve's modest accommodative measures and concerns about the central bank's downbeat economic outlook.
The most actively traded contract, for July delivery, settled 4.60 cents, or 1.3%, lower at $3.3875 a pound on the Comex division of the New York Mercantile Exchange.
Copper futures retreated as investors who had hoped to see aggressive stimulus action were disappointed by the Fed. The central bank extended what is known as the "Operation Twist" program aimed at lowering long-term interest rates and encouraging borrowing and investment, which was set to expire in June.
"The market had been hoping for something more, as it has become evident global growth is struggling and the European mess looks far from solved," traders at RBC Capital Markets said in a note to clients.
However, Fed officials avoided more robust moves, like a third round of quantitative easing. Instead, the policy statement signaled the bank was "prepared to take further action" if the U.S. economy or the labor market required the additional help.
Copper prices faced added pressure after Federal Reserve officials lowered their economic growth outlook for 2012. The Fed now expects the U.S. economy to grow in the range of 1.9% to 2.9% this year, down from the 2.4% to 2.9% range predicted in April.
The central bank also expects to see more weakness in the labor market, with unemployment ranging between 8.0% to 8.2% this year, versus April's forecast of 7.8% to 8.0%.
"The downbeat tone of the economic forecasts have added much more negativity to copper, which is obviously more sensitive to economic concerns," said Dave Meger, vice president and director of metals trading at Vision Financial Markets. "The more industrial the metal, the worse its performance based on those downbeat projections," he added.
Copper settlements (ranges include electronic and pit trading):
Jun $3.3865; down 4.60 cents; Range $3.3765-$3.4275
Jul $3.3875; down 4.60 cents; Range $3.3565-$3.4330