By Anna Stablum May 19 (Bloomberg) -- Copper fell in New York and London after Germany’s ban on some bets against government bonds fanned concern about Europe’s sovereign-debt crisis, spurring investors to avoid equities and commodities. Raw materials from crude oil to robusta coffee dropped. The MSCI World Index of shares retreated for a fifth day. The Markit iTraxx Crossover index of credit-default swaps on 50 European companies, which typically rises as investor confidence deteriorates, jumped. The U.S. Dollar Index rose for a seventh day before erasing the advance. “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. Futures for July delivery dropped 6.35 cents, or 2.1 percent, to $2.9675 a pound at 8:26 a.m. on the Comex in New York. The most-active contract has slid 12 percent this month. Copper for delivery in three months fell 2.3 percent to $6,540 a metric ton on the London Metal Exchange. The dollar index, a six-currency gauge of the greenback’s strength, slipped 0.2 percent after rising 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 index has advanced 12 percent this year as LME copper has dropped 11 percent. 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 slid 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. Lead, Tin Aluminum for three-month delivery on the LME dropped 2.3 percent to $2,005 a ton. Inventories in LME-monitored warehouses rose for a second day, up 0.9 percent to 4.55 million tons, the highest since April 27. Lead reached the lowest intraday price since July and zinc fell to the lowest level since September. Lead dropped 3.8 percent to $1,765 a ton and zinc fell 3.9 percent to $1,865.45 a ton. Tin shed 2 percent to $17,150 a ton and nickel declined 4.6 percent to $21,150 a ton. On the futures market, one party accounts for more than 40 percent of aluminum short positions, or bets on lower prices, expiring in May, LME data from May 17 showed. The short position for June expiry of more than 40 percent declined to 20 percent and 29 percent. The biggest bet on a price gain expiring in May shrank to between 10 percent and 19 percent on May 17 from over 40 percent in the previous session. Aluminum, copper, lead, zinc, tin and nickel supply outpaced demand in the first quarter, the World Bureau of Metal Statistics said today. --With assistance by Patrick Chu in Singapore, Lucia Kassai in Sao Paulo and Matt Craze in Santiago. Editors: Dan Weeks, Stuart Wallace. 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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