Market and product

Three-month copper on the London Metal Exchange traded up 0.7 per cent at $8,683 at 0932 GMT, compared with $8,635 a tonne at the close on Wednesday, when it fell to its lowest in more than a month at $8,590. Copper has now dropped by 15 per cent from record highs of $10,190 a tonne hit in February with calls for it to revisit records this year receding, given an increasingly uncertain economic climate.

“The (metals) market is very much driven by the bigger uncertainties in the macro environment,”analyst Stefan Graber of Credit Suisse Private Banking said.

Helped by signs that euro zone leaders are committed to keeping Greece afloat for now, stock markets rose for a third day and the euro steadied, lending a calmer tone to metals. But high costs for European banks to obtain dollar funding may yet lead them to cut credit lines, forcing institutional investors to scale back exposure to risky or cyclical assets, he said. “We are still far from a normal money market environment, so there is still a lot of caution in the system...so base metals are candidates for forced liquidation.”

French and German leaders urged Greece’s prime minister in a conference call late on Wednesday to meet the terms of its new bailout and said they were determined to keep the country in the euro zone.

Suggesting metals may see further selling, the euro has been under pressure as market players, spooked by fears that a possible debt default in the euro bloc could unleash a major financial crisis, remain ready to sell the currency and risk assets into any rally. A stronger dollar provides headwinds for commodities because they become more expensive for holders of other currencies.

“There is little doubt in our mind that the edge has been taken off physical demand for the base metals during Q3,” Standard Bank said in a note.

“Our expectations for Q4 are also now starting to look ambitious given the flow of disappointing data. Against this backdrop prices are facing mounting pressure.”

Later in the session, markets will be watching a string of US economic numbers, including industrial production for August, for indicators on its economic health.