The markets hammered copper on Wednesday after the Federal Reserve said in its Beige Book survey that economic prospects in the United States appear to be dimming.
The red metal — widely considered a barometer of future economic growth, slipped 4% on Wednesday — the biggest one-day plunge in three weeks as investors fled equity markets. The North American indexes were a sea of red, with the S&P 500 index down over 1% and the TSX Composite off 1.69%.
“Overall economic activity continued to expand in September, although many districts described the pace of growth as ‘modest’ or ‘slight’ and contacts generally noted weaker or less certain outlooks for business conditions,” Reuters reported, quoting the findings compiled by the Fed Bank of Chicago.
LME three-month copper slumped 3.2% to end at $7,210, while the December COMEX contract finished at $3.25 per pound, a 10-cent drop. Reuters notes copper has lost more than 6% of its value so far this week, with a credit rating downgrade of Spain on Wednesday and a report of weakening growth in China in the third quarter contributing to investor worries.
It appears the market for copper has yet to price in supply disruptions from two strikes at mines owned by No. 1-listed copper producer Freeport McMorran (NYSE:FCX) — one at its huge Grasberg mine in Indonesia and another at its Cerro Verde mine in Peru.
The US company threatened to declare force majeure at Grasberg after the strike turned violent earlier this week, and has lowered its 2012 guidance from 4 billion pounds to 3.9 billion.
