Shanghai Copper Falls for 4th Day, Data May Drag

SINGAPORE, June 16 -- Shanghai copper fell for a fourth day on Tuesday, chasing steep losses in London in the previous session, in the face of wilting confidence that the world economy had turned a corner.

    Sentiment was dealt a blow after U.S. factory data showed a slump in New York state, shrinking at a more severe rate in June than the previous month.

    Coupled with continued strength in the dollar, that was sufficient to break investor faith in hard assets, which have jumped by 60 percent or more this year.

    Analysts said the easing in commodities prices could be the second part of a 'W'-shaped recovery in the global economy.

    "We expect the second 'U' of the 'W' to be less deep than the first. Commodities are starting to see the effect of dollar appreciation and this weakness may last for one or two months," said Ben Westmore, commodities economist at National Australia Bank.

    "But we see the trend in global industrial production rising in the fourth quarter and markets pricing that recovery in during the third."

    He added there was a risk that China, which to date has been the main engine of the surge in commodity markets, might not pick up the ball and run with it in the second half of the year.

    "If China feels like it has stockpiled enough and demand doesn't pick up, then the weakness could last longer, though that is a risk, not a forecast." he said.

    Shanghai's new benchmark third-month copper futures contract, September , fell 2 percent to 38,960 yuan a tonne by 0332 GMT, reversing the gains made so far June.

    Copper for delivery in three months on the London Metal Exchange fell $46 to $4,960 a tonne, extending Monday's 4.3 percent slide and retreating further from last week's eight-month high of $5,388.

    On the supportive side, LME warehouse stocks fell 3,300 tonnes to 286,975, their lowest since late November.

    A clutch of data due later in the day, including euro zone and U.S. inflation for May, U.S. housing numbers, industrial output and capacity utilisation, is likely to set the tone. [ECON] "The market seems to have its bearish hat back on. The numbers out later today could knock it off or screw it down more tightly," a trader in Singapore said.

    "My feeling is we'll have a mixed batch, but given the trend of the past few days, unless we get an upside shocker, the market will react negatively."

    LME aluminium shed $9 to $1,600 a tonne, having lost 2.1 percent on Monday. Shanghai metal dropped just 10 yuan to 13,275 yuan.

    Shanghai zinc fell 1.4 percent to 13,315 yuan racing to catch up with a 6.8 percent slide in London. LME zinc lost $10 on Tuesday to $1,565.

    Nickel slipped $225 to $14,550, testing technical support, but could rebound, according to chartist Daryl Guppy of Guppytraders.com.

    "The upside target is $17,000 calculated from the breakout from the long-term trading band."

    He pegged initial support near $14,500, which was near the top of the range touched several times in early June, and long-term support near $13,500, where rallies in November, January and May stalled.

    "This is a strong and sustainable uptrend but look for consolidation retreats, particularly from resistance near $17,000," he said.

    (Source: Reuters)