Speculation about the U.S. Federal Reserve tapering monetary stimulus measures earlier than forecast prompted copper futures to drop to their lowest value in 90 days on Wednesday, according to Bloomberg.
Also pulling down the reddish metal during the midweek trade session was its production in China, the globe's largest consumer, climbing to an all-time high earlier this autumn. The base metal is sensitive to worldwide economic and financial developments due to its myriad uses in construction, manufacturing and additional industry.
The likelihood of the Fed slashing stimulus as soon as December "could very well take place," President Dennis Lockhart of the Federal Reserve of Atlanta.
In October, refined copper production advanced 23 percent to amount to 637,000 metric tons as compared to one year prior, data released by the National Statistics Bureau of China states.
"Imminent tapering and Chinese output surges compounded the weakness," states an email authored by senior director Michael Turek with Newedge Group SA in New York, according to Bloomberg. "The markets seem to be getting short enough to set themselves up for a decent year-end rally, but for now if these markets pick up their heads they appear likely to get kicked in the teeth."
At 10:42 a.m. on Wednesday, copper futures fell 2.4 percent, a 0.0775-cent slide to $3.1565 per pound.
Chinese growth falls under question
The Asian nation accounts for use of an estimated 40 percent of the globe's supply of the reddish metal. The U.S. is the world's second-largest consumer of the base metal.
MarketWatch reports concerns are spreading about the pace of growth in China, which also dragged down other industrial metals.
Base metal prices "are falling across the board amid the ongoing discussion about when the U.S. Federal Reserve will reduce its bond purchases and on the back of weak Chinese equity markets," commodities strategist Eugen Weinberg with Commerzbank in Frankfurt wrote in a client note, according to MarketWatch.
The government of China is believed to be prepared to slash next year's growth target to 7 percent, the commodities strategist said.
Members of China's ruling party earlier this week concluded meetings that resulted in the drive toward reform objectives. But those objectives were short on details, especially when considering economic goals for the Asian nation. Consequently, Chinese stocks lost value.
The commodities strategist said the country is planning to follow-up the vague plans sometime soon with additional information that might impact the performance of copper futures.
"A more comprehensive reform plan is to be published in the next few weeks, though it is questionable whether this will contribute to rising metal prices — after all, most of the reforms are likely to target sustainability rather than rapid growth," the commodities strategist's note stated.
Fed meeting scheduled for next month
Reuters reports the commentary by the Atlanta Fed president could pertain to the mid-December meetings that the body is planning.
Should policy makers with the U.S. Federal Reserve slash economy-spurring monetary stimulus measures when they convene on December 17 and 18, the markets would have less liquidity for business and commodity investors, which also would reduce demand for base metals.
A reduction in asset purchases also would shine a light on borrowing costs and whether the Fed is considering a hike. But how much the program would be impacted when policy makers reduce it also presents a circumstance with attached dynamics.
"There is still a bit of confusion around the dynamics of tapering … It's also partly to do with the plenum, which was very vague as far as pace and degree of reform," chief economist Thomas Lam with DMG & Partners Securities in Singapore told Reuters. "It raised uncertainty and as part of that there is selling of risky assets today."
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