COMEX CLOSE - Commodity selloff sinks copper, oil declines

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Dalton Barkerdalton.barker@fastmarkets.comNorth American Correspondent+1 312 292-0942

Chicago 06/01/2016 - Copper futures dipped after China's recent market intervention raised concerns over the countries demand moving forward.

Copper for March delivery on the Comex division of the New York Mercantile exchange dipped 0.75 cents to close at $2.0880 per pound. Trade ranged from $2.0715 to $2.0955.

After Monday's poor economic figures, today's release of the December's Caixin Services PMI once again disappointed investors at 50.2 – the slowest expansion in 17 months.

The reading is critical as it covers roughly half of Chin'a GDP and is close to 50, which denotes contraction.

In response to the tumultuous start of the year, the People's Bank of Bank of China (PBoC) injected 130 billion yuan ($20 billion) in short-term funds into the country's financial system – weakening the yuan to lowest level since September 2010.

"Global stock markets resumed their downwards path today after China weakened in currency again, giving rise to fresh concerns for global growth and the country’s ability to cope with recent domestic market turmoil," Sucden Financial, said. "The PBoC has consistently fixed its yuan/dollar reference rate lower each day since the start of the New Year."

Base metals are unlikely to see a sustained recovery anytime soon as markets are expected to be relatively quiet as Chinese investors prepare for their own holiday season.

"We suspect that metals will likely be in for a difficult patch this year for a variety of reasons... we could see some of this weakness set in later this month in anticipation of the Chinese New Year and the light buying that should soon start to set in," Edward Meir, an analyst at INTL FCStone, sad.

Furthermore, China's State Reserve Bureau (SRB) is expected to complete its purchase of 150,000 tonnes of copper by the end of the week although the move is unlikely to have a major impact on prices.

Turning to US equities, the Dow Jones industrial average and S&P were down 1.8 percent and 1.7 percent respectively, while the dollar was trading 0.5 percent softer at $1.0794 against the euro.

Meanwhile in data, it was a pretty strong day for the US with ADP Non-farm Employment Change for December showing the US economy added 257,000 jobs, greatly exceeding the 193,000 estimate.

ISM Non-Manufacturing PMI for December was 55.3, missing the mark of 56. Factory orders in November were-line with expectations at -0.2 percent, while crude oil inventories fell 5.1 million.

Additionally, the trade balance for November came in at -42.4 billion, below forecasts of -44 billion.

Meanwhile in other commodities, light sweet crude (WTI) oil futures fell to the lowest point since early 2009 and was last trading at $33.99 per barrel, while the most-actively traded gold contract stood at $1,093.80 per ounce, up 15.40.

(Editing by Tom Jennemann)



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