December 5, 2011 / 11:05 AM / 9 years ago

METALS-Copper falls in reversal on Europe ratings worry

* Turns negative on worry S&P may downgrade European countries
    * New worry erases early gains on France, Germany agreement
    * China services PMI falls; easier monetary policy eyed
    * Coming up: IBD U.S. consumer confidence data Tuesday

    By Chris Kelly
    NEW YORK, Dec 5 (Reuters) - Copper turned negative in late
business on Monday, tracking the euro's reversal versus the dollar
after a media report said ratings agency S&P warned Germany, France
and four other top-rated euro zone countries that they risk losing
their AAA rating in 90 days.
    The Financial Times report that Standard & Poor's issued the
warning roiled the euro, metals and other markets which had risen
earlier when an agreement between France and Germany inspired
optimism that European leaders were nearing a solution to the
region's debt crisis.
    Europe's debt crisis has been the biggest overhang for copper
investors this year, crimping demand prospects for a metal essential
in the development of everything from housing to automobiles.
    London Metal Exchange (LME) three-month copper fell to
$7,927.50 per tonne by 3:15 p.m. EDT (2015 GMT), backing away from
its session close at $7,940.
    In New York, the key March COMEX contract was down 3.25
cents at $3.5520 per lb in late electronic trade, erasing an earlier
positive settlement at $3.6155 per lb.
    "We are reaching a point now (in the euro zone debt crisis) where
it's all or nothing and a critical decision has to be made or it
could be the beginning of something quite nasty," said Barcap analyst
Gayle Berry.
    "Given that the European debt crisis has been the single biggest
weight on metals prices, if we do get something that the market
receive favourably then I think you could see an improvement in
prices particularly on the back of short covering."
    An upbeat view of Chinese consumption gave copper another early
boost on Monday, after Beijing moved last week to cut reserve
requirements for commercial lenders for the first time in three
    "I think there is an undercurrent of people feeling a little
better about the China situation ... the ease in the reserve
requirements and the potential for a soft landing," said Steve
Shafer, who helps manage $300 million as chief investment officer of
Oklahoma City-based Covenant Investors.
    Futures volumes stood at a thin 37,250 lots in late New York
trade, nearly 37 percent below the 30-day norm, according to
preliminary Thomson Reuters data.
    French President Nicolas Sarkozy and German Chancellor Angela
Merkel agreed on a master plan for imposing budget discipline across
the region, saying the EU treaty will need to be changed.
    Sentiment also received an early boost from news that Italy had
unveiled a 30-billion-euro package of austerity steps, while Ireland
also detailed 2.2 billion euros worth of spending cuts.MIXED BAG
    Data out earlier showed the service sector in China shrank in
November, mirroring similar weakness seen last week in data from the
country's manufacturing sector.
    The numbers were a mixed bag for market sentiment, reinforcing
expectations that Beijing could ease monetary policy further, which
could boost metals prices.
    Also, copper has been moving out of mostly Asian-based LME
warehouses since October, while stocks in Asian bonded warehouses
fell 11.6 percent last week.
    This signals good Asian demand that could only be aided by easier
monetary policy.
    In the United States, the pace of growth in the vast U.S.
services sector slowed in November to the slowest since January 2010,
according to the Institute for Supply Management.
 Metal Prices at 2024 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
COMEX Cu       355.05       -3.40     -0.95     444.70    -20.16
 LME Alum      2129.00       -1.00     -0.05    2470.00   -13.81
 LME Cu        7939.50       44.50     +0.56    9600.00   -17.30
 LME Lead      2120.00       15.00     +0.71    2550.00    -16.86
 LME Nickel   18505.00      765.00     +4.31   24750.00    -25.23
 LME Tin      20000.00       50.00     +0.25   26900.00    -25.65
 LME Zinc      2040.00      -12.00     -0.58    2454.00    -16.87
 SHFE Alu     16220.00      -35.00     -0.22   16840.00    -3.68
 SHFE Cu*     57960.00     -100.00     -0.17   71850.00    -19.33
 SHFE Zin     15715.00      -80.00     -0.51   19475.00    -19.31
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
0 : 0
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