SINGAPORE (Reuters) - London copper fell to a one-month low on Wednesday as renewed worries over Greek and Spanish sovereign debt hit risk appetite and curbed expectations on metals demand, before erasing some losses alongside the euro.
Soaring borrowing costs for Spain and concerns that Greece may not meet its bailout terms fueled jitters about the euro zone, knocking fragile confidence after a report showed an improving economic picture in China on Tuesday.
China is the world’s top consumer of copper, accounting for 40 percent of refined demand last year. A report on Tuesday showed the country’s manufacturing output in July grew at its fastest pace in nine months, which helped briefly improve sentiment towards metals.
“People are still shifting their thinking to accept less than double digit growth from China. We do know that Chinese demand has slowed, but it’s certainly not a negative outlook for copper,” said Matt Fusarelli, analyst at Australia-based consultancy AME Group.
“The catalysts just aren’t here for another short-term price rally ... But we do expect prices to recover towards the later part of the year,” he added.
China’s economy is set for a soft landing even as global headwinds increase, the International Monetary Fund said in a report on Wednesday that urged further reform and currency appreciation to rebalance growth and reduce risks.
Three-month copper on the London Metal Exchange traded at $7,375 at 03.05 a.m. EDT, down 0.57 percent from the previous session, when it logged a small advance. Prices earlier fell to $7,344.25 a metric ton (1.1023 tons), the lowest since June 27, and are down nearly 3 percent for the year.
The most-traded November copper contract on the Shanghai Futures Exchange closed down 1.6 percent at 53,630 yuan ($8,400) a metric ton.
Investors continued to give the euro and risk currencies a wide berth on Wednesday following a selloff in global stocks as worries on Europe festered, though the euro was off its intraday lows. <USD/>
Spain paid the second highest yield on short-term debt since the birth of the euro at an auction on Tuesday, and EU officials said Greece had little hope of meeting the terms of its bailout, casting fresh doubt on its future in the euro zone.
A softer dollar makes commodities less expensive for holders of other currencies.
On Wednesday, volumes for LME copper were solid with more than 8,000 lots changing hands, suggesting bargain hunters were coming in to support prices.
“There has been various bits of consumer buying first thing but only light. The main buyers seem to be CTAs and hedge funds trading the range,” a Singapore based trader said.
In industry news, LME shareholders decide on Wednesday whether to accept a $2.2 billion offer by the Hong Kong stock exchange for the 135-year-old institution.
A survey published by Reuters on Monday with responses from 38 of the banks, funds and industrial users entitled to vote -- more than half of the total -- showed that most of those who had reached a decision would vote yes to a sale of the exchange at an extraordinary general meeting.
($1 = 6.3858 Chinese yuan)
Reporting by Melanie Burton; Editing by Richard Pullin and Joseph Radford