Copper, ali fall to multi-month lows; investors in risk-off mode

Base metals were lower across the board on the LME at the start of a new trading week – copper and aluminium fell to multi-month lows on waning investor appetite for risky assets on growing concerns that the Federal Reserve will raise rates next week.

“Another bout of selling saw the commodity complex end [last] week on a negative note. This is likely to continue this week with a lack of data releases keeping current investors positions unchanged,” ANZ noted.

Today, equities tumbled by their furthest since the Brexit vote after investors became increasingly convinced that the US central bank will move soon. On Friday, the head of the Boston Fed, Eric Rosengren, said a reasonable case can be made for a rate increase.

The CME FedWatch Tool is showing slim odds for a September rate increase, with Fed futures implying just a 24-percent probability, while they now imply a 46-percent probability for a December rise, up from 41 percent at the end of last week.

Today, the focus will be on Fed governor Lael Brainard’s speech, which was only scheduled on Friday and will be the last before the September 20-21 FOMC meeting.

The economic calendar is fairly quiet today – Japan’s PPI dropped 3.6 percent while other Japanese data on machine and tool orders was mixed. Italian quarterly unemployment rate was as expected at 11.5 percent.

Chinese industrial production and retail sales numbers scheduled for release tomorrow are forecast to be unchanged – “any deviation from this is bound to cause a sharp reaction either way,” Kingdom Futures’ Malcolm Freeman noted.

Markets in China will be closed on Thursday and Friday for the mid-Autumn festival.

In the metals, copper fell to $4,582 – its lowest since June 20 – before recently trading at $4,607 per tonne, down $26 on Friday’s close.

Volume has picked up, with more than 9,000 lots having changed hands on Select so far. But the pick-up in volume and weaker direction bode ill, FastMarkets’ William Adams noted.

“With the winding down of summer, the copper market has entered into a lull as prices reach new lows in volatility,” Barclays noted. “While recent data out of China are encouraging, actions in western markets, including an LME warehouse build-up and the possibility of a September rate hike, are the new threat.”

In warehouse data, copper stocks rose a net 3,600 tonnes to 354,200 tonnes and cancelled warrants climbed 6,900 tonnes to 54,875 tonnes.

In copper news, the strike at Codelco’s copper mine El Salvador in Chile ended on Friday after five days but industrial action at Anglo American’s Los Bronces continues.

Aluminium at $1,571.50 was down $7 and around its lowest since June 13. Stocks and cancelled warrants both fell 6,300 tonnes to 2,190,050 and 893,250 tonnes respectively.

Nickel at $10,035 was down $335, having fallen earlier below the key $10,000 level to its lowest in a week. Stocks fell 180 tonnes to 367,752 tonnes.

Zinc slipped to its lowest in one month – it was last at $2,264.50, down $27. Stocks were down 800 tonnes to 447,950 tonnes. Lead fell to a two-week low and was last at $1,872, down $30, with stocks unchanged at 187,850 tonnes.

Likewise, tin fell to its lowest in around two weeks before trading recently at $19,110, down $190. Stocks and cancelled warrants both fell 75 tonnes to 4,215 tonnes and 1,145 tonnes. In the spreads, cash/threes was last at $57 back, down from $250 back on Wednesday. The weaker spread may well indicate profit-taking and lending by profit-takers, FastMarkets’ Adams noted.

Steel billet, cobalt and molybdenum were neglected.

(Editing by Mark Shaw)