Metals drift lower as investors flee risk

Print this page Posted on : 06-28-2007 by recycleinme.com

Investors switching to safer assets due to fears of economic slowdown weighed on industrial metals on Wednesday, but strikes at mines capped losses.

Weaker metal prices hit London-listed miners. Xstrata, BHP Billiton and Rio Tinto shed around 3 per cent, in line with falling European shares, which tracked losses in US and Asian markets.

Copper for delivery in three months on the London Metal Exchange (LME) was at $7,290 / 7,300 a tonne at 0913 GMT, down 1 per cent, or $70, from Tuesday’s close.

The weakness in metal prices was a continuation of the cross-asset sell-off on Tuesday, analyst Mr. Kevin Norrish at Barclays Capital said. “But we do not see any change in underlying fundamentals,’ he said.

Investors have been increasingly unnerved over the past weeks by troubles at two Bear Stearns-managed hedge funds with exposure to sub-prime – or high risk – US mortgage securities.

A sharp sell-off or failure of such mortgages could raise borrowing costs for companies, threaten banks with bad debts and bring losses to a wide variety of investors.

“Liquidity issues might prompt some short-term profit taking, eg, sub-prime lending worries,” analyst Mr. John Meyer at Numis said.

STRIKES SUPPORT

On the other hand, a series of ongoing strikes and threats of new ones could cap losses at a time when LME stocks are at critically low levels, traders said.

Source : Business Line