Copper future tradings review

Sharp setback this month copper prices have weighed on exchange-traded products in the metal industry, as well as tracking stock fund material and Chile.

The iPath Dow Jones-UBS Copper Subindex Total Return ETN (JJC 56.12, +0.50, +0.90%) lost about 6% last week and traded below $55 a share, down from its recent high of $61.69. The exchange-traded note has a market capitalization of about $264 million and is designed to reflect the performance of copper-futures prices.

The red metal’s slump is a worrying sign for stock bulls and the global recovery because copper is seen as a leading economic indicator.

“There is an old saying that every stock bull market has a copper top,” Stock Trader’s Almanac said in a note last week.

“While not entirely true, as a key industrial material and benchmark of economic growth, copper tops have coincided with stock bull market tops on enough occasions to warrant concern,” the report added.

PowerShares DB Base Metals Fund (DBB 23.92, +0.07, +0.29%) has also been under pressure this month although copper is the biggest loser among the base metals.

Copper is set to absorb its biggest decline since June 2010 “on high energy prices and concerns of a slowdown in China,” Dahlman Rose & Co. said in a March 11 market update.

A separate report last week showed copper imports by China plunged 35% in February to the lowest level in more than two years.

Not surprisingly, ETFs that invest in copper miners such as First Trust ISE Global Copper Index Fund (CU 40.15, +0.74, +1.88%) and Global X Copper Miners ETF (COPX 18.02, +0.34, +1.92%) have lost ground.

The weakness in copper prices has also spilled over into exchange-traded funds that target materials stocks.

The largest sector ETF for the group by assets is Materials Select Sector SPDR Fund (XLB 37.91, +0.56, +1.49%) with $2.5 billion in assets. The fund lost roughly 3% last week and is the only ETF among the 10 Select Sector SPDRs that is in negative territory for 2011.

The materials ETF’s tracking index is comprised of companies from subsectors including chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products.

Falling copper prices have hurt some of the fund’s top positions. For example, copper-mining giant Freeport-McMoRan Copper & Gold Inc. (FCX 49.48, +1.69, +3.54%) is the second-largest holding at 10.8% of assets, while Newmont Mining Corp. (NEM 52.12, +0.78, +1.52%) accounts for 6.1% of the portfolio. Both stocks are off more than 10% so far this year.

Other materials ETFs include iShares Dow Jones U.S. Basic Materials Sector Index Fund (IYM 76.50, +1.10, +1.46%) , Vanguard Materials ETF (VAW 82.09, +1.04, +1.29%) and First Trust Materials AlphaDEX Fund (FXZ 24.01, +0.34, +1.44%) .

Sagging copper prices have also pulled down iShares MSCI Chile Investable Market Index Fund (ECH 67.31, +0.08, +0.12%) , which has been a top performer among emerging-markets ETFs the past two years. Chile is the world’s largest copper exporter.

The Chilean ETF has dropped about 16% so far this year to fall below its 200-day moving average, a closely watched technical indictor.

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