Politics, not weather, key to commodities markets

Oct 30, 2012 | 09:37 AM | Andrea Hotter

Tags  copper, aluminum, China, elections, Andrea Hotter, Hurricane Sandy

NEW YORK — Metals prices slid lower to start the week as Hurricane Sandy made its way up the East Coast, but this weakness appears to have less to do with the weather and more to do with politics.

The focus of financial markets' attention this week is on possible changes of power in both the United States and China, the former with presidential elections on Nov. 6 and the latter scheduled to begin the transition to a new leadership at the 18th National Party Congress beginning Nov. 8.

For metals market participants, the key questions for the two countries is how the results of both political events will impact growth in these two economic giants, as well as relations between them.

Admittedly, the latest U.S. growth data was not too bad. U.S. third-quarter gross domestic product rose 2 percent on an annualized basis, although government spending surged nearly 10 percent to account for 0.7 percent of this growth.

Market watchers say federal spending is likely to resume a downward path next year and could shrink even faster if further fiscal tightening takes place.....