BS: Copper Advances for a Fourth Day on Dollar, Gains by Equities
July 22 (Bloomberg) -- Copper rose for a fourth day in New York and London as the dollar slumped, equities climbed and growth in European manufacturing and services industries beat estimates.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.9 percent. The FTSE 100 Index added as much as 1.1 percent in London, and Germany’s DAX Index gained as much as 1.8 percent. Prices also advanced as copper stockpiles continued to contract and bookings to remove metal from inventories rose to a 13-month high.
“A weaker dollar and, especially, strong equity markets in Europe are moving metals prices higher,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said by phone.
Futures for September delivery gained 5.85 cents, or 1.9 percent, to $3.1515 a pound at 9:04 a.m. on the Comex in New York. The most-active contract erased a drop and climbed as high as $3.16, the highest price since June 1. Copper for delivery in three months rose 1.6 percent to $6,970 a metric ton on the LME.
A weaker dollar makes metals priced in the currency cheaper in terms of other monies. Still, the dollar index is up 6.3 percent this year, contributing to Comex copper’s 6.7 percent retreat.
A composite index based on a survey of euro-area services and manufacturing purchasing managers increased to 56.7 from 56 in June, London-based Markit Economics said today. Economists had projected a drop to 55.5, the median of 18 estimates in a Bloomberg survey showed. A reading above 50 indicates expansion.
Smaller Stockpiles
Europe probably will account for about 20 percent of global copper usage this year, according to Barclays Capital.
Copper inventories tracked by the LME shrank for a 25th day today, the lengthiest run since a 40-session streak that ended on July 2, 2009, data compiled by Bloomberg shows. Stockpiles fell to 416,525 tons, the lowest level since Nov. 18. They’re down 17 percent this year and headed for the first annual drop since 2004.
Bookings to remove copper from LME warehouses rose for a third day. They gained 15 percent, the most since June 14, to 38,550 tons, the highest level since June 2, 2009.
LME copper has jumped 7.4 percent this week, more than the 1.5 percent climb by the Shanghai contract. That narrowed the gap between the two, reducing the opportunity for so-called arbitrage traders to profit from the difference by purchasing metal in London and selling it in Shanghai.
Discount to Shanghai
“The arbitrage is closed,” said Randy North, a trader at RBC Capital Markets in London. “But fundamentals tend to take a back seat at the moment” because prices were driven higher as investors who had bet on falling prices made purchases to close out positions, he said, referred to by traders as short- covering.
LME copper traded at a discount to Asian prices at the start of this week after last week’s 4.1 percent retreat, more than the 0.8 percent drop by the October contract in Shanghai.
Price gains are partly “evidence of strong physical demand by fabricators and short-covering by funds who, rightfully in our view, doubt the sustainability of the recovery in the Western world,” Daniel Brebner, an analyst at Deutsche Bank AG in London, said in a report today.
Figures today may show declines in U.S. sales of existing homes in the U.S. and in a gauge of the next three to six months. Construction accounts for a quarter of copper demand, according to the Copper Development Association.
House Sales
The Conference Board’s index of leading economic indicators, due at the same time, probably fell 0.3 percent in June after rising 0.4 percent in May, according to the survey median. A decline would be the first since March 2009.
Aluminum for three-month delivery on the LME rose 1.1 percent to $2,029 a ton, lead advanced 2.1 percent to $1,905 a ton and nickel climbed 1.8 percent to $19,836 a ton. Zinc added 0.6 percent to $1,930.25 a ton and tin gained 0.2 percent to $18,400 a ton.
--With assistance by Emma Ross-Thomas in Madrid and Simone Meier in Frankfurt. 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: Claudia Carpenter at ccarpenter2@bloomberg.net.
