Copper hits three-week low, euro zone concerns weigh
LONDON (Reuters) - Copper hit a three week low on Monday as the euro fell and as investors grew concerned over the outlook for metals demand due to renewed fears that Spain will have to seek a full sovereign bailout.
Also knocking sentiment were worries that Greece may leave the euro, as German magazine "Der Spiegel" reported that the International Monetary Fund may not take part in any additional financing for the country, highlighting growing frustration with Athens.
Spanish bonds yields soared to their highest levels since the euro was created, as Murcia looked on course to become the second Spanish region to request financial assistance from the government after Valencia, with media reports suggesting six regions could seek aid.
Spain's economy sank deeper into recession in the second quarter, its central bank said on Monday, as investors spooked by a funding crisis in its regions pushed the country ever closer to a full bailout.
"We're heading into a vulnerable and volatile period over the next 1-2 months for base metals and other risk assets. Copper could head down to the low 6,000s and assuming that the macro indicators line up, that's where we could get a good buying opportunity," said Guy Wolf, macro strategist at Marex Spectron.
"I do think prices (for copper) could go lower because there is just no demand from China at the minute. Over the next three months, the outlook for copper is bearish."
Three-month copper on the London Metal Exchange fell to $7,408.50 at 1514 GMT from Friday's close of $7,545, having earlier hit a low of $7,359.75, its weakest point since late June.
Nickel sank to a three-year low and tin hit its lowest since last September. Lead, zinc and aluminum all reached three-week lows.
Copper has fallen more than 12 percent since the end of the first quarter, dented by slowing growth in top copper consumer China, a shaky recovery in United States and mounting sovereign debt problems in the euro zone.
The latter in particular have weighed heavily on the euro, which reached two year lows versus the dollar earlier, making dollar-priced metals costlier for European investors. <FRX/>
Traders are currently awaiting manufacturing data from China and Europe, due on Tuesday, for further clues on the health of the global economy and its implications for metals demand.
"We are looking out for news of fresh stimulus measures in China and the United States, and concrete measures to deal with Spain's problems," said an analyst with an international trading firm, although she added that China was unlikely to act in July, as it would be too soon after a recent rate cut.
GRIM ECONOMIC ENVIRONMENT
The grim economic backdrop offset an International Copper Study Group report on Friday that said the global refined copper market was in a 384,000-tonne deficit from January to April 2012, up sharply from a 26,000-tonne deficit during the same period of 2011.
The report implied some support from fundamentals for copper prices at current levels, but bearish market sentiment and global economic uncertainties are weighing on the demand outlook and discouraging investors from buying.
In other metals traded, LME nickel dipped as far as $15,450, its lowest since July 2009, dragged down by the euro zone worries as well as weak global demand for its most important downstream product, stainless steel. It later traded at $15,625 from Friday's close of $15,950.
Tin fell to $18,406 from $18,930, having earlier fallen nearly 5 percent to hit its lowest since last September at $18,011, as traders took profits on a metal that has this year been the top performer after zinc and copper.
Battery material lead was at $1,866 from $1,901, having earlier hit its lowest since early July at $1,851 a metric ton. Latest data showed LME stocks fell by 1,975 metric tons ( 2177.1 tons) to hit their lowest since September last year, having retreated 13 percent from record peaks in October.
Aluminum fell to $1,867 from $1,895, having earlier hit its lowest since late June at $1,857 a metric ton. LME stocks were up by 18,075 metric tons to 4.85 million metric tons, but with aluminum for September delivery trading at a premium of around $4 a metric ton over October, despite the nominal stock oversupply.
Zinc, used in galvanizing, slipped to $1,804 having earlier hit its lowest since late June at $1,801.50 a metric ton. It was untraded at the close on Friday but bid at $1,887.
(Editing by Anthony Barker)
(This story was corrected to fix the third para to say Murcia looked on course to request aid, not that it had done so)
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