RememberThe immortal words of Warren Buffet - "In the short term, the market is a voting machine. In the long term, it is a weighing machine." Here's what the market voted on today:
Tue Aug 16, 2011 2:32pm EDT
* Copper sustains losses late after Franco-German talks
* Weak German Q2 GDP fans global recovery fears
* U.S. Housing starts fall less than expected in July
* Coming up: U.S. July producer price data on Wednesday(Rewrites, adds New York dateline/byline, updates prices, adds details andanalyst comments)
By Chris Kelly and Harpreet Bhal
NEW YORK/LONDON, Aug 16 (Reuters) - Copper ended down after touching itslowest level in a week on Tuesday, as risk appetite subsided after surprisinglyweak German growth data fanned worries about a faltering global economicrecovery.
Losses were sustained in after-hours business after a meeting betweenFrench and German leaders failed to quell concerns about the euro zone debtcrisis.
French President Nicolas Sarkozy and German Chancellor Angela Merkelproposed a tax on financial transactions and closer joint governance ofeconomic policy to stop the debt crisis in Europe, but did not proposeincreasing the euro zone bailout fund or selling euro zone bonds.[ID:nL5E7JG0IH]
"The market was obviously fixated on whether they would perhaps improbablyagree to support the notion of euro bond issuance, where Germany and Francewould agree to underwrite and guarantee some of the debt issuance for some ofthe other members," said Peter Buchanan, commodities analyst and senioreconomist with CIBC in Toronto, Canada.
"Unless you get that, the general conclusion is that the crisis over thereis not very much closer to a solution than it was a couple of weeks ago."
London Metal Exchange (LME) benchmark copper CMCU3 sank to an earliersession- and one-week low at $8,751 per tonne before ending with a loss of $79at $8,830. After the close, prices inched back down in the aftermath of theSarkozy-Merkel comments.
In New York, the September COMEX contract HGU1 fell by 3.80 cents or 0.94percent to settle at $3.9940 per lb.
Investors reduced risk after data showed the German economy slowed betweenApril and June to its weakest quarterly growth rate since 2009.[ID:nL5E7JG0N0]
Better-than-forecast U.S. July industrial output data and asmaller-than-expected decline in home building last month failed to calm theglobal economic jitters. [ID:nN1E77F0B6]
"The housing numbers and the permit numbers suggest that this soft patchmay be a bit more insidious than just a patch," said Bart Melek, head ofcommodity strategy with TD Bank Financial Group.
"The softness in Q2 may extend well into Q3."
Fitch Ratings affirmed the United States' top-notch credit rating at AAA,giving the world's largest economy a reprieve after it was downgraded byStandard & Poor's little more than a week ago. [ID:nLDE77F0T2]
But with three-month LME copper still trading at a discount to the Novembercopper contract on the Shanghai Futures Exchange, there remains an incentivefor the Chinese to import, but price-sensitive buyers will likely wait forcosts to stabilize.
"The appetite hasn't been there. The Chinese are quite price sensitive.They bought aggressively on the dip late last week and they have stepped awayagain so that support isn't there anymore," said analyst Leon Westgate atStandard Bank.