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Commodity prices sag as Greece’s EU membership looks doubtful

By Michael Bellart  (Global Times)

08:22, May 24, 2012

Any optimism about an upswing in Chinese consumption took a backseat to the possibility that Greece might leave the eurozone ahead of the EU summit yesterday, driving down domestic commodity prices across the board.

The most traded copper contract on the Shanghai Futures Exchange (SHFE), for September delivery, slumped 1.52 percent to close at 55,000 yuan ($8,683.52) per ton. The contract fell 1.07 percent when the market opened, tracking a 1.23 percent drop in the corresponding copper future on the London Metal Exchange (LME) overnight.

Base metals and other commodities fell as investor turned their backs on risky assets after Greece's former Prime Minister, George Papademos, said the country was making preparations to leave the eurozone, according to Natalie Robertson, commodity analyst with ANZ Research.

European leaders were scheduled to hold an informal summit late yesterday, at which they would discuss the idea of creating bonds underwritten by all the member states.

The rally that started Monday in the financial markets had petered out by Tuesday night, as the value of the euro fell and the US dollar strengthened. The US Dollar Index, which measure the dollar's value against a basket of currencies, had risen 0.69 percent in the 24 hour preceding the close of the domestic markets yesterday. A stronger dollar makes commodities more expensive for holder of other currencies.

Other highly traded, but unrelated, commodity contract plummeted along with SHFE copper. The January cotton contract on the Zhengzhou Commodity Exchange fell 2.71 percent. Meanwhile, the January sugar contract contracted by 2 percent.

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