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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 01/30/2008 : 20:24:27
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.50 point more rate cut today and copper drops on fears of slower U.S. growth? It doesn't look like the rate cuts are working yet to me.
Copper Drops on Fresh Concern Slower U.S. Growth to Cut Demand
By Millie Munshi
Jan. 30 (Bloomberg) -- Copper fell for the first time in five sessions on renewed concern the U.S. will slip into a recession, curbing demand for the metal used in pipes and wires.
The U.S. economy weakened more than forecast in the fourth quarter, Commerce Department data showed. A Federal Reserve decision on interest rates is due at 2:15 p.m. New York time. A ``large'' reduction in borrowing costs will be needed to help revive U.S. growth, said Matthew Zeman, a metals trader at LaSalle Futures Group in Chicago.
``There are a lot of jittery people ahead of the Fed's announcement,'' Zeman said. ``People are looking to the Fed to come in with their magic wand and bail everyone out.''
Copper futures for March delivery dropped 7.25 cents, or 2.2 percent, to $3.2265 a pound on the Comex division of the New York Mercantile Exchange. The metal gained 7.4 percent in the previous four sessions.
Economic growth slowed to an annual rate of 0.6 percent last quarter, half the rate forecast. Interest-rate futures indicate a 78 percent chance the U.S. central bank will lower its benchmark rate by half a percentage point to 3 percent. The Fed has lowered borrowing costs four times since September.
``We need at least a 50-basis-point cut to stave off a recession,'' Zeman said. Copper will continue to fall as the U.S. economy contracts this year, he said.
``Growth looks set to slow further'' in 2008, John Kemp, a London-based analyst at Sempra Metals Ltd., said in a report. ``The deepening downturn in residential and commercial construction'' will limit expansion, he said.
`Severe Decline'
Homebuilding plunged 24 percent last quarter, the eighth consecutive decline and the most in 26 years, the Commerce Department said. Residential construction is down 29 percent in the past two years, marking the biggest housing slump since 1982.
``The GDP report showed a severe decline in housing,'' said William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. ``That's clearly a negative for copper.''
Builders are the biggest users of the metal, putting about 400 pounds in the average U.S. home, according to the Copper Development Association.
Still, declines in the copper price may be limited. China's production may drop after snowstorms disrupted power supplies and transportation. Storms sweeping the Asian country this month have been the worst in decades, delaying shipments of coal to power stations and causing blackouts.
On the London Metal Exchange, copper for delivery in three months dropped $131, or 1.8 percent, to $7,160 a metric ton ($3.25 a pound). The price has climbed 27 percent in the past 12 months. The metal rose to a record $8,800 a ton in May 2006.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
Last Updated: January 30, 2008 14:13 EST
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Copper Drops on slower U.S. growth concerns
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Posted - 01/30/2008 : 21:45:02
