Copper is down 2% as traders press the sell button, after the HSBC Chinese PMI came in below expectations at 49.6, with analysts expecting a positive reading of 50.5.
Not only did the report come in below estimates, as the reading was below 50.0 it was the first contraction in Chinese manufacturing in seven months. The price of copper has already been drifting lower over the past few months as traders feared the Chinese economy was slowing down. Copper is an essential metal for Chinese manufacturing and homebuilding, and Beijing recently said copper imports were at a 22-month low. Last night’s report confirmed traders’ suspicions that demand for copper in the world’s second-largest economy is in decline.
The manufacturing sectors of France, Germany and the UK are all in contraction, and this is also weighing on sentiment, as sluggish growth in Europe offers less demand for the red metal. The UK economy barely grew in the first quarter of 2013 and the eurozone is in its sixth consecutive quarterly contraction – unless things improve, copper demand is likely to remain weak.