Copper prices in New York were dragged to one-month lows by a sinking euro on Monday as nervous investors piled into safe-haven government debt and the U.S. dollar fearing debt-laden Spain may be forced to seek a full bailout.
The sell-off left few asset classes unscathed, as Spain's woes worsened coupled with new concerns about a possible Greek exit, but commodities underperformed even the broader weak financial markets as the euro sank to two-year lows.
COMEX's most-active September contract built on Friday's hefty losses, falling almost 3 percent to a one-month low early in swift early morning trade and piercing 20- 30- and 50-day moving averages.
Sentiment was knocked after data showed Spain's economy sank deeper into recession in the second quarter, but took a turn for the worse after tiny Murcia appeared on course to be the country's second region to request help from the central government.
U.S., German and British government debt hit record lows, but Spanish bond yields soared to euro-era highs, with local media reporting half a dozen local authorities were also ready to follow in the footsteps of indebted Valencia.
"Base metals are likely to remain sloppy at least over the next few days, as investors wait for the Europeans to pull yet another rabbit out of their hats," said Ed Meir, INTL FCStone metals analyst.
Few expect much respite, with economists forecasting gloomy global macroeconomic data this week.
"With the euro hitting new lows and renewed fears stemming from euro, one could easily feel that bears are gaining solid traction and prices could potentially drop a little more. Stand back from the freight train as they say," said RBC Capital analysts.
Copper in New York managed to move off intraday lows by midday and traded in a narrow 4-cent range for most of the day, but was still 1.97 percent lower at $3.38 per lb at the settlement.
Three-month copper on the London Metal Exchange also fared poorly, hitting a low of $7,359.75, its weakest point since late June. It ended at $7,401 a tonne, down from Friday's close of $7,545.
Nickel sank to a three-year low and tin hit its lowest since last September. Lead, zinc and aluminium all reached three-week lows.
Copper has fallen more than 12 percent since the end of the first quarter, dented by slowing growth in top copper consumer China, a shaky recovery in the United States and mounting sovereign debt problems in the euro zone.
Investors' despair at the lack of long-term resolution to the euro-zone crisis has hurt liquidity on the LME and COMEX, analysts have warned. Open interest, an indicator of liquidity, has slumped to three-year lows on the LME, while COMEX copper hit five-month lows earlier this month.
Traders will watch manufacturing data from China and Europe, due on Tuesday, and key U.S. factory orders on Thursday followed by growth data on Friday for further clues on the health of the global economy and its implications for metals demand.
U.S. durable goods orders and second-quarter GDP are expected to show the world's largest economy has lost momentum in the past month.
"We are looking out for news of fresh stimulus measures in China and the United States, and concrete measures to deal with Spain's problems," said an analyst with an international trading firm, although she added that China was unlikely to act in July, as it would be too soon after a recent rate cut.
FALLING BASE METALS
Monday's selling knocked other LME base metals, with all six falling below 30-day moving averages, RBC said.
LME nickel dipped as far as $15,450, its lowest since July 2009, dragged down by the euro-zone worries, as well as weak global demand for its most important downstream product, stainless steel. It ended at $15,600 from Friday's close of $15,950.
Tin closed at $18,350 from $18,930, having earlier fallen nearly 5 percent to hit its lowest since last September at $18,011, as traders took profits on a metal that has this year been the top performer after zinc and copper.
Battery material lead ended at $1,860 from Friday's close of $1,901, having earlier hit its lowest since early July at $1,851 a tonne. The latest data showed LME stocks fell by 1,975 tonnes to hit their lowest since September last year, having retreated 13 percent from record peaks in October.
Aluminium ended at $1,878 from $1,895, having earlier hit its lowest since late June at $1,857 a tonne. LME stocks were up by 18,075 tonnes to 4.85 million tonnes, but with aluminium for September delivery trading at a premium of around $4 a tonne over October, despite the nominal stock oversupply.
Zinc, used in galvanizing, closed at $1,814 having earlier hit its lowest since late June at $1,801.50 a tonne. It was untraded at the close on Friday, but bid at $1,887.
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