By Anna Stablum May 20 (Bloomberg) -- Copper may fall in New York and London as the dollar strengthens on concern European governments are divided on how to contain financial turbulence in the wake of the region’s sovereign-debt crisis. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose as much as 0.5 percent, erasing a drop. It has advanced 11 percent this year as copper has slid 12 percent in London, pulled down by concern that China, the world’s biggest consumer, might step up measures to tackle asset bubbles as well as the European debt crisis. “It’s just a continuation of the funk that the markets are in at the moment,” said David Thurtell, an analyst at Citigroup Inc. in London. “People are very nervous and are cutting risk until there is some clarity over Europe and China.” Futures for July delivery fell 0.55 cent, or 0.2 percent, to $2.954 a pound at 8:22 a.m. on the Comex in New York. The most-active contract pared a climb of as much as 2.9 percent. Copper for delivery in three months on the London Metal Exchange rose 0.2 percent to $6,520 a metric ton. LME copper is heading for a sixth weekly drop in a row, which would be the longest streak since a seven-week slide that ended in August 2008. The dollar index is on course for a fifth weekly advance. A stronger U.S. currency makes dollar-priced metals more expensive in terms of other monies. Smaller Inventories Copper had climbed as much as 3.3 percent on the LME today on speculation that prices fell too far this month at a time when inventories of metal are shrinking. LME copper had dropped 13 percent in May at this month’s lowest intraday price on May 17. Inventories tracked by the LME shrank for a third day today, slipping 0.2 percent to 481,300 tons, and are headed for a third monthly drop in a row. Bookings to remove metal from warehouses gained 9.1 percent to 23,500 tons, extending this week’s increase to 27 percent and on course for the biggest climb in four weeks. Aluminum for three-month delivery on the LME fell 1.4 percent to $1,974 a ton. Global output of the lightweight metal rose to a record 112,500 tons a day last month, the International Aluminium Institute said. Immediate-delivery metal’s discount to the three-month price, the so-called contango, was at $31.50 a ton, little changed from $31.75 in the previous session. It reached $22 on May 14, the lowest since July. Lead slipped 0.3 percent to $1,750 a ton and zinc dropped 0.5 percent to $1,848 a ton. Tin declined 1.4 percent to $17,200 a ton and nickel fell 1.6 percent to $20,950 a ton. --With assistance by Li Xiaowei in Shanghai. 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.

Source