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Copper falls with equities on economic worries

LONDON - London Metal Exchange copper prices eased on Monday in low volume as many investors took a step back ahead of the New Year and metals were still seen taking their direction from global equity markets.

Copper for delivery in three months fell $75 or 1.1 percent to $6,470/6,490 a tonne by 1017 GMT, the lowest since November 22.

‘This complex continues to struggle in an environment of falling nominal interest rates in the U.S., lower global equity markets and rising LME inventories,’ head of commodities research, Michael Lewis, at Deutsche Bank said in a report.

Industrial metals were the worst performing sector, against precious metals and energy, in terms of spot price performance last week, Lewis said.

Three-months copper has shed 6 percent since December 10, while lead dropped 9 percent during the same period.

Lead shed $80 or 3.2 percent to $2,400/2,410 - levels last seen six-months ago.

‘A few longs (a position taken in anticipation of a price rise) out there are getting out—saying it is not a great end of the year, but lets not do too much and start again in the New Year,’ an LME trader said.

The metals market was still taking direction from the global equity markets, traders and analysts said.

‘Asian stocks were lower, hence the poorer metals,’ analyst Leon Westgate at Standard Bank said.

European stock markets were suffering with Britain’s FTSE 100, Germany’s Dax and France’s CAC index all trading more than 1.5 percent lower.

Mining stocks such as Vedanta and Antofagasta fell over 4 percent in London.

‘Today the miners will be down again because of fears of growth and the imminent cuts to consensus earnings for fourth quarter 2007 due to the current weakness in copper and nickel,’ analyst Jeremy Gray at Credit Suisse said in a note.

Three-months nickel was down $600 at $25,900/26,100.

US and Asian shares dropped after strong US inflation data on Friday tempered hopes for another prompt interest rate cut by the Federal Reserve.

‘Results from the banks, tomorrow, Wednesday and Thursday may spice things up if the metals continue to take direction from the wider financial markets,’ Westgate said.

Housing data this week and earnings from three of Wall Street’s biggest investment banks and brokerage firms, including Goldman Sachs, will keep investors on edge.

Many funds and index trading vehicles were seen stepping aside as near-month prices of most metals are below forward months, a situation called contango, and the shift in the shapes of the forward curves hurt investors that roll contracts month to month.

‘These macro guys are interested in metals when they are in backwardation and there are opportunities to make money,’ the LME trader said.

In a backwardation funds sell the more expensive near-month contract and buy the cheaper second month, collecting a profit.

A contango of $54 in nearby copper spreads is a sign that long-standing market tightness has disappeared, traders said. In contrast in May 2006, when copper hit an all-time high of $8,800, the backwardation stood at $200.

Stocks in LME warehouses rose by 550 tonnes to 194,500, doubling since July and up by some 35 percent in two months.

Three-months aluminium was down $4 to $2,411/2,416 and tin was at $16,100/16,200, down $200.