Spanic and Grexit put copper back on defensive

After a more than 3% intra-day jump on Monday following initial euphoria over Spain's banking lifeline and positive data out of China over the weekend,  copper futures were trending weaker on Tuesday.

Front-month copper contracts were trading at $3.33 a pound in early morning trade on the Comex in New York and around $7,400 a tonne in London, after hitting an intraday high above $3.37 on Monday as investor digested the news of a 100 billion euro bailout fund for Spain's troubled banks.

While the Spanish bailout is now being called 'voodoo economics' and 'bound to fail', worries about Greece's Sunday election outcome is also back with a vengeance.

According to Reuters EU finance officials on Monday discussed "limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario should Athens decide to leave the euro".

According to Bloomberg RBC Capital Markets said in a research note today that concerns about the debt crisis and slowing growth “continue to keep the market on the defensive.”

May was the third month of declines for the commodity which is a bellwether for the metals industry and copper is now down more than 18% over the past year. The red metal hit historic highs  at the end of July last year of a shade under $4.50 a pound (more than $10,000 a tonne).

Last week copper found support after a surprise rate cut in China – the first since the global financial crisis – which is responsible for more than 40% of global consumption of the metal, but a new report from the OECD show economic activity indicators in China and India are showing signs of slowing.

The world's metal miners have become increasingly dependent on Chinese economic growth to keep profits and revenues flowing. In March, the Chinese government set a target of 7.5% growth for 2012, the lowest since 2004, but official figures showed first quarter 2012 numbers topping that at 8.1%.