copper declines in new york

Copper Declines in New York on Concern Equity Losses May Spread

By Millie Munshi

Aug. 1 (Bloomberg) -- Copper futures fell in New York on concern that losses in equity markets may spread, slowing the U.S. economy.

The Standard & Poor's 500 Index in July had the biggest monthly decline in three years amid speculation that defaults on subprime mortgages may spill over to other areas. Industrial metals ``could be more sensitive to the concerns in the credit market than other commodities,'' said Michael Lewis, global head of commodity research at Deutsche Bank AG.

Today's drop is ``mostly coming off of the losses in the stock markets,'' said John Hanemann, president of Hanemann Trading Co. in New York. ``People are very concerned that it's going to spread, and that it's going to cause a recession.''

Copper futures for September delivery dropped 6.35 cents, or 1.7 percent, to $3.585 a pound on the Comex division of the New York Mercantile Exchange. The metal still has gained 25 percent this year.

U.S. shares fell following declines in Asia and Europe.

``Concerns about the stock market are very much full frontal at the moment,'' said Mo Ahmadzadeh, president of metals trading at Mitsui Bussan Commodities in New York. ``There are concerns about losses at hedge funds and the market is worried.''

The lingering U.S. housing slump also spurred selling in copper futures, Hanemann of Hanemann Trading said. A gauge of homebuilder stocks fell to the lowest since 2003 on speculation Beazer Homes USA Inc. may file for bankruptcy.

Housing Recession

The U.S. is mired in the worst housing recession in 16 years. Purchases of new homes fell 6.6 percent in June, the biggest drop since January, the government said last week. Declines in residential construction slashed copper demand by 6 percent in 2006, according to the International Copper Study Group.

``New home sales are in the toilet,'' Hanemann said. Further declines in housing will continue to curb metal use, he said.

Sales of existing homes unexpectedly rose 5 percent in June, a report from the National Association of Realtors said today. Economists had been expecting a 0.5 percent decline in pending home sales, according to the median of 26 forecasts in a Bloomberg survey.

Chile's state-owned Codelco, the world's biggest copper producer, yesterday reached an agreement with contract workers at its mines in Chile to end a strike that reduced production for more than five weeks. The company said today it expects to resume full production this week.

On the London Metal Exchange, copper for delivery in three months fell $150, or 1.9 percent, to $7,860 a metric ton. The metal rose to a record $8,800 a ton in May 2006.

To contact the reporter on the story: Millie Munshi in New York at [email protected] .