Copper fell for a sixth day in New York, the longest streak since June, after Standard & Poor’sput a “negative” outlook on the AAA credit rating for the U.S., the second-largest consumer of the metal.
S&P cited a “material risk” that U.S. leaders will fail to deal with rising budget deficits and debt. Equity benchmarks in the country fell, and the difference in yields between 2- and 30-year Treasuries widened to the most in five weeks.
“People are very frightened by this news, and they’re going to liquidate any positions that they have,” said Phil Streible, a senior strategist at broker Lind-Waldock in Chicago.
Copper for July delivery dropped 7.6 cents, or 1.8 percent, to $4.2015 a pound at 12:28 p.m. on the Comex in New York. Prices declined as much as 2 percent. The metal for three-month delivery lost 1.9 percent to $9,227 a metric ton on the London Metal Exchange.
The Dow Jones Industrial Average fell as much as 2 percent and was last down 1.7 percent at 12,128.56 points, led by shares of Caterpillar Inc. and Alcoa Inc.
Copper also retreated as China, the world’s biggest consumer, raised banks’ reserve requirements again and a report showed confidence among U.S. homebuilders fell in April. Construction accounts for a quarter of copper demand, according to the Copper Development Association.
Chinese Inflation
The reserve-requirement increase was the fourth this year and followed a hike in interest ratesby less than two weeks. Reserve requirements will rise a half point as of April 21, the People’s Bank of China said yesterday on its website. Authorities are moving to cool inflation, which is running above the government’s target.
“Concerns remain that China could be stepping on the brakes too hard as monetary policy, even in China, doesn’t work immediately and thus lags a month or so behind the announcements,” Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe Ltd. in London, said in a report today.
The National Association of Home Builders/Wells Fargo sentiment index declined to 16 this month from 17 in March, data from the Washington-based group showed today. The drop was led by a decline in the outlook for sales, a sign the residential construction market may languish near record-low levels.
“Any kind of negative news, you’re going to see a continued decline there,” Streible said, also pointing to rising copper stocks in LME warehouses and subdued demand.
LME copper inventories gained 1,350 tons to 451,775 tons, the highest level since June 29, daily exchange figures showed. They’re up 30 percent from the 2010 low on Dec. 10. Orders to draw metal from stockpiles, or canceled warrants, fell 7 percent to 14,250 tons.
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