October 19, 2011 / 9:23 AM / in 9 years

METALS-Copper extends losses late after Fed comments

* Copper falls more after Fed sees dimming econ prospects
    * Sentiment hit by Spanish ratings downgrade
    * Mine strikes in Indonesia, Peru hit copper supply
    * Coming up: U.S. weekly jobless claims on Thursday

    By Chris Kelly
    NEW YORK, Oct 19 (Reuters) - Copper extended losses to nearly 4
percent in late trade on Wednesday, tracking a negative turn in
equities, after the U.S. Federal Reserve said in its Beige Book
survey that economic prospects appeared to be dimming.
    "Overall economic activity continued to expand in September,
although many districts described the pace of growth as 'modest' or
'slight' and contacts generally noted weaker or less certain outlooks
for business conditions," the findings compiled by the regional Fed
Bank of Chicago said.
    Equity markets erased gains and the S&P 500 Index fell
more than a percent, taking copper down with it in the metal's
biggest one-day plunge in three weeks, as a wave of risk aversion
swept across the broader markets.
    "The Beige Book started the late selling and pressured the S&P,
and that pushed into the copper market," said Sterling Smith, an
analyst for Country Hedging Inc. in St. Paul, Minnesota.
    "Financial activity slowed in some districts ... that's the
phrase that got me."
    London Metal Exchange (LME) three-month copper slumped to
a late-session low at $7,170 per tonne, after ending the day down
$239, or 3.2 percent, at $7,210.
    In New York, the key December COMEX contract finished down
10.20 cents at $3.2580 per lb, and pushed lower in electronic
business to $3.2060.
    Copper has lost more than 6 percent of its value so far this
week, with a credit rating downgrade of Spain on Wednesday adding
another layer of macro pressure tied to Europe's debt debacle and a
declaration in China's third-quarter growth fanning concerns about
the health of the global economy.
    With macro concerns dominating sentiment, the market has failed
to react to a pair of strikes at two major mines owned by
Freeport-McMoran Copper & Gold Inc , which have already
reduced production rates and could place a further strain on a market
already in a production deficit.
    "We are seesawing with global sentiment ... the market is
completely preoccupied by the whole euro zone story and we will have
this uncertainty until the Oct. 23 crisis summit when we expect they
will announce some kind of coherent plan," said Andrey Kryuchenkov,
analyst at VTB Capital.
    Efforts to secure a deal to tackle the euro zone debt crisis are
stalled over methods to increase the firepower of the region's
bailout fund, French President Nicolas Sarkozy said on Wednesday.
    A downgrade of Spain's debt rating by Moody's ratings agency
served as another reminder to European leaders that they must make
rapid progress on solving their debt problems.
    In company news, Freeport posted better-than-expected quarterly
profit as weak copper prices were offset by soaring gold and it was
able to hold down mining costs.
    In a conference call with Wall Street analysts, the company's
chief executive said he saw a disconnect between the financial
markets' view of copper and the physical market, which remained
strong.
    "On a global basis, the physical markets are much stronger than
you would see as indicated by the financial markets' reactions ...
that's driven by these macro economic factors that create a lot of
uncertainty over where the marketplace is going," CEO Richard
Adkerson told Wall Street analysts on a third-quarter earnings
conference call.
    Earlier this week, Freeport threatened to close its strike-hit
Grasberg mine in Indonesia, the world's second largest.
    The miner lowered its 2012 copper sales forecast to 3.9 billion
pounds, down from September estimate of 4.0 billion pounds.
    The company's Cerro Verde mine in Peru has also been plagued by a
labour dispute. Talks between management and union leaders are
scheduled for Thursday in what would be a final bid to end a
20-day-old strike.Metal Prices at 1919 GMT
 COMEX copper in cents/lb, LME prices in $/T and SHFE prices in
yuan/T
 Metal            Last      Change  Pct Move   End 2010   Ytd Pct
                                                            move
 COMEX Cu       321.35      -14.65     -4.36     444.70    -27.74
 LME Alum      2181.00      -27.00     -1.22    2470.00    -11.70
 LME Cu        7209.00     -240.00     -3.22    9600.00    -24.91
 LME Lead      1870.00      -55.00     -2.86    2550.00    -26.67
 LME Nickel   18800.00     -350.00     -1.83   24750.00    -24.04
 LME Tin      21925.00      580.00     +2.72   26900.00    -18.49
 LME Zinc      1837.00      -45.00     -2.39    2454.00    -25.14
 SHFE Alu     16385.00       30.00     +0.18   16840.00     -2.70
 SHFE Cu*     53890.00      210.00     +0.39   71850.00    -25.00
 SHFE Zin     14590.00       75.00     +0.52   19475.00    -25.08
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
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