By Anna Stablum May 19 (Bloomberg) -- Copper fell in London as the dollar strengthened after Germany prohibited speculating on sovereign debt, sending the euro to the lowest level in more than four years. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose for a seventh day in a row. The Markit iTraxx Crossover index of credit-default swaps on 50 European companies, which typically rises as investor confidence deteriorates, jumped. The MSCI World Index of shares retreated for a fifth day. “Higher risk aversion, as witnessed by the stronger dollar and weaker equity markets worldwide, is bringing metals under pressure,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone today. Copper for delivery in three months fell $185, or 2.8 percent, to $6,510 a metric ton at 9:51 a.m. on the London Metal Exchange. The contract has slid 12 percent this month. Futures for July delivery dropped 2.7 percent to $2.9495 a pound on the Comex in New York. The dollar index rose as much as 0.4 percent to the highest intraday level in 14 months. A stronger U.S. currency makes dollar-priced metals more expensive in terms of other monies. The gauge has advanced 12 percent this year as LME copper has dropped by the same amount. Naked Swaps Germany barred traders from buying default protection on government bonds they don’t own, so-called naked swaps. The new rules rattled investors by raising concerns they won’t be able to hedge their European holdings or sell assets as the region’s debt crisis worsens. Copper also has dropped this year as China, the world’s biggest consumer, moves to restrain its economy. Sales of new homes in Shanghai dropped 16 percent to a five-year low last week after China raised minimum mortgage rates, restricted pre- sales by developers and tightened controls on purchases of second and third properties. “Worries about a possible cool-down in China, coupled with euro-zone concerns, are putting metals under pressure,” Commerzbank’s Weinberg said. Copper stockpiles tracked by the LME fell for a second day, slipping 0.2 percent to 482,225 tons. Bookings to remove metal from inventories jumped 17 percent to 21,550 tons, the highest level since May 4. Aluminum for three-month delivery on the LME dropped 2.8 percent to $1,995 a ton. Alcoa Inc., the largest U.S. producer of the lightweight metal, said it may invest $3 billion in a new smelter in Brazil and shut other units in the South American country because of “prohibitive” energy costs. Lead dropped 4.7 percent to $1,749 a ton and zinc fell 5.1 percent to $1,840 a ton. Tin shed 1.4 percent to $17,250 a ton and nickel declined 5.5 percent to $20,925 a ton. Immediate-delivery aluminum’s discount to the three-month price, the so-called contango, widened to $27.75 a ton yesterday from $25 in the previous session. It reached $22 on May 14, the lowest since July. A wider gap signals increased availability of metal. --With assistance by Patrick Chu in Singapore, Lucia Kassai in Sao Paulo and Matt Craze in Santiago. Editors: Dan Weeks, John Deane. To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net. To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net.

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