Copper Futures Fall Sharply Amid Stronger Dollar and Weaker Equities

Strategic Insights -

Copper futures suffered a sharp decline on Thursday, with the most-active December contract settling at $2.7370 per pound on the Comex division of the New York Mercantile Exchange, down 8.20 cents from the previous close. Analysts attributed the drop to a combination of factors, including a stronger dollar and weaker equities, as well as disappointing economic data. Bill O'Neill of LOGIC Advisors noted that the dollar was a major factor in the decline, while Ron Coby of Coby Lamson Capital Management suggested that the global economic recovery is facing headwinds, leading to a potential shift from a reflation trade to a deflation trade.

Key Takeaways:

  • Copper futures dropped sharply on Thursday, with the most-active December contract settling at $2.7370 per pound, down 8.20 cents from the previous close.
  • Analysts pointed to a stronger dollar and weaker equities as major factors contributing to the decline in copper prices.
  • Bill O'Neill of LOGIC Advisors attributed the drop to the dollar, as well as disappointing economic data, including jobless claims and the Institute for Supply Management's September manufacturing index.
  • Ron Coby of Coby Lamson Capital Management suggested that the global economic recovery is facing headwinds, leading to a potential shift from a reflation trade to a deflation trade.
  • Coby noted that China's economy, the world's largest copper consumer, is also showing signs of topping, which could further pressure copper prices.
  • The market is exhibiting characteristics of a "bear-market rally" on a reflation trade, but may be ready to head back south.
  • Inventories of copper stored in London Metal Exchange warehouses rose 400 metric tons on Thursday, while Comex inventory data were up 81 short tons.

Statistics:

  • Most-active December copper futures settles at $2.7370 per pound, down 8.20 cents from the previous close.
  • First-time initial jobless claims rose 17,000 to 551,000.
  • The Institute for Supply Management's September manufacturing index dipped slightly to 52.6 from 52.9 the prior month.
  • The euro was down to $1.4542 from $1.4636 late Wednesday afternoon.
  • The December S&P 500 futures down more than 20 points just after the copper pit closed.
  • Inventories of copper stored in London Metal Exchange warehouses rose 400 metric tons to 346,050.
  • Comex inventory data were up 81 short tons to 53,483 short tons.

Sources:

  • Dow Jones Commodities News via Comtex
  • LOGIC Advisors
  • Coby Lamson Capital Management
  • Institute for Supply Management
  • American Banking Association
  • Dow Jones Newswires (By Allen Sykora)