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Copper Prices? Sounds More Like A Take Out Menu

Copper prices dip 1.9 percent as the political crisis in Greece and declining property prices in China continue to be a drag for industrial metals.

by Jim Williams

What will it be today? Greek? Chinese? How about something from the good ol’ U.S.A.?

It is back to work for US traders after Monday’s holiday. Presidents’ Day didn’t stop activity across the global markets, as investors continue to keep an eye on the political situation in Greece and prep for the Chinese New Year.

The price hovers around the $2.60 level at Tuesday’s opening bell.

Greek a la carte

Late on Monday, officials in Athens lashed out at demands that they stick to the previous government’s program to retain financial support, with the Greek government rejecting a proposal to request a six-month extension of its international bailout package. Jeroen Dijsselbloem, who chaired last night’s meeting, told Greece it has until Friday to request the extension bailout or the program would expire at the end of the month. “We want an honorable settlement,” Greek Finance Minister Yanis Varoufakis said following the talks. “It’s not a bluff, because it’s the only option we have. It’s Plan A. There is no Plan B.”

“The political crisis in Greece continues to be a drag for industrial metals,” Australia & New Zealand Banking Group Ltd. told investors in a note. “Greece needs more financial flexibility, and in return needs to offer up more structural reform.”

The Bank also predicts the markets will become increasingly impatient and look for more concrete signs that progress is being made.

Chinese: Dine in, or Take-Out?

With the Chinese market preparing to shut down for the Chinese New Year holiday, trade is expected to remain thin with prices mostly going sideways. The Shanghai market will close from Wednesday until Tuesday, February 24. The Singapore markets will also close for a two-day holiday.

A new report from the Chinese National Bureau of Statistics states that house prices in China fell by an annualized 5.1% in January, a fifth straight monthly decline. New-home prices slid from a month earlier in 64 out of 70 cities tracked by the statistics agency.

Fang Junfeng, an analyst at Shanghai Cifco Futures Co., told Bloomberg: “China’s property data remains weak and shows that the industry is still on a downward track. Metals consumption growth in China has been slowing on the property step back and the trend is expected to continue this year.”

CNBC reported on Monday that Chinese authorities will take further measures to ensure economic growth of about 7% in 2015, including cutting interest rates, boosting liquidity and tolerating some currency weakness. The People’s Bank of China recently reduced the minimum reserve requirements for banks by 1% after it cut interest rates in late 2014 for the first time in over two years.

The market was also jittery ahead of the week-long holidays in China and as the uncertainty around the Eurozone’s stability spurred concerns about European demand.

Anyone for a Japanese Dish?

Data on Monday showed Japan’s economy was able to swing out of recession in the fourth-quarter of 2014, but growth fell short of expectations as household and corporate spending disappointed. This complemented a drop in US consumer confidence in February.

Potpourri from Around the Globe

In Europe, consumer inflation in the UK dipped in January to the lowest since the data series began in 1989, while investor confidence in Germany jumped to the highest in a year in February, boosted by the upcoming implementation of fresh stimulus by the ECB.

Providing some support on the supply side, this year’s global copper surplus may be thinner than previously expected as BHP Billiton Ltd. reported that as much as 70,000 tons of refined copper output will be lost due to repairs after an electrical failure at the largest processing mill at its Australian Olympic Dam mine.

This would remove a large portion of an expected surplus, which analysts had estimated prior to the announcement at 120,000 – 220,000 tons. The supply disruptions will probably cut global copper output growth to 5.1% in 2015, ANZ Banking said.

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