By Chanyaporn Chanjaroen May 25 (Bloomberg) -- Copper fell in New York and London as the dollar strengthened and investors shied away from risky assets on concern that Spain’s ailing banks signal a widening European debt crisis. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, climbed for a second day. Commodities from crude oil to soybeans retreated, and the MSCI World Index of equities dropped for an eighth day in nine. Prices also slid after a report that North Korean leader Kim Jong Il ordered his military to prepare for combat last week. “Risk aversion drove equities and metals lower,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said today by phone. “Metals now trade like financial instruments, and investor sentiment matters.” Copper for July delivery declined 10.2 cents, or 3.2 percent, to $3.0455 a pound at 8:38 a.m. on the Comex in New York. Copper for delivery in three months lost 2.5 percent to $6,735 a metric ton on the London Metal Exchange. All of the six main metals traded on the LME fell, led by nickel. July-delivery copper has slid 9.2 percent on Comex in May, heading for the biggest monthly drop since December 2008. “Current metal price levels are attractive in the longer term,” Weinberg said. “Still, in the short term, copper may fall to $6,000 if it can’t hold above $6,500.” Bank Mergers Four Spanish banks said they will combine as regulators push lenders to merge with stronger partners. The euro fell for a second day against the dollar. The North Korean order was broadcast on May 20, according to the website of North Korea Intellectuals Solidarity, a group run by defectors from the communist country. Gains by the U.S. currency make dollar-priced metals more expensive in terms of other monies. The dollar index has advanced 6.4 percent in May. Copper also has slid in recent weeks on concern that China, the world’s biggest consumer, may take more steps to control its economic growth. Authorities have raised bank reserve requirements three times and introduced real-estate curbs in an effort to cool lending and speculation. Still, copper demand in China may expand as much as 12 percent this year, according to a unit of Wanxiang Group, the country’s largest auto-parts maker. Chinese Usage “Consumption is still strong,” driven by continued economic growth, said Sheng Weimin of Wanxiang Resources Co. Usage, including refined and scrap copper, may climb to 8.96 million tons, said Sheng, who’s studied metals markets for more than 15 years. Inventories of copper tracked by the LME shrank for a sixth day today to 479,325 tons, headed for a third monthly drop in a row. Including those monitored by commodity exchanges in Shanghai and New York, they totaled 738,959 tons, the lowest since February. Bookings to remove metal from LME-monitored warehouses jumped 16 percent to 26,025 tons. Zinc for three-month delivery on the LME slid 3.2 percent to $1,868 a ton. Stockpiles of the metal used to rust-proof steel jumped for a third day to 617,325 tons, the highest since June 2005. Almost all of the new deliveries took place in New Orleans, which holds 55 percent of LME-registered inventories. Lead fell 4.1 percent to $1,755 a ton, extending this year’s drop to 28 percent and outpacing zinc’s 27 percent retreat. Aluminum slid 3.4 percent to $2,014 a ton and tin dropped 2.3 percent to $17,351 a ton. Nickel declined 4.2 percent to $21,260 a ton. --With assistance from Glenys Sim in Singapore. Editors: Dan Weeks, Stuart Wallace. To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net. To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net.

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