Copper Sliding as Hedge Funds ‘Get Out of Dodge’: Chart of the Day
March 8 (Bloomberg) -- Gerard Minack, a developed markets strategist at Morgan Stanley, talks about the outlook for the global economy. Minack talks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
Copper futures are headed for their biggest monthly decline in more than a year, halting a rally that sent prices to a record in February, as China seeks to slow its economy and hedge funds switch to less-risky assets.
The CHART OF THE DAY shows copper inventories rising as speculators reduced their bullish bets on the metal. Prices are down 8 percent in March, heading for the first monthly decline since June and the biggest since January 2010. Stockpiles in warehouses monitored by exchanges in London, New York and Shanghai rose 26 percent from a 13-month low on Dec. 10.
Even before Japan’s catastrophic March 11 earthquake sent raw materials plunging, prospects for copper demand were ebbing. Asian countries from China to Indonesia raised interest rates this year to curb inflation. In February, shipments of copper into China, the world’s biggest metals buyer, tumbled 35 percent from a month earlier to the lowest in more than two years.
“This is money getting out of Dodge before the sheriff shows up,” said Pete Sorrentino, who helps oversee $14.4 billion at Huntington Asset Advisors in Cincinnati. “We saw the handwriting on the wall when the Chinese made multiple attempts to slow growth.”
Since touching a record $4.6575 a pound on Feb. 15 in New York, copper futures have fallen 11 percent to close yesterday at $4.137 on the Comex. The price may dip to $4 before rebounding, said Michael Pento, a senior economist at Euro Pacific Capital Inc. in New York who correctly predicted copper’s slide in January.
“The global economy is going to slow, and this is bad news for copper,” Pento said. “Inflation is destroying these emerging markets, and all these countries are trying to cool their economies.”
Fund Holdings, Japan
Managed-money funds held net-long positions, or wagers on rising prices, totaling 22,274 futures and options contracts as of March 8, down 13 percent for the week and 43 percent from a record on Dec. 28.
Demand also may slow after Japan’s earthquake and tsunami shuttered factories, including carmakers, and disrupted power supply following explosions at a nuclear-power plant.
“You’ve taken the third-largest economy offline,” said Pento of Euro Pacific Capital. “When Japan starts to re-build, that may take copper to $4.75 this year.”
To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
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