By Anna Stablum Sept. 9 (Bloomberg) -- Copper fell the most in almost two months in London on signs of a weakening economy in the U.S., the world’s second-largest consumer, and on a stronger dollar. The U.S. economy showed “widespread signs of a deceleration,” the Federal Reserve said yesterday in a survey known as the Beige Book. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, rose as much as 0.3 percent today. Prices also slid after a report that Chinese regulators are investigating positions in rubber futures. “The markets were going to be a bit softer after the Beige Book,” said Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe in London. He also called today’s retreat a “knee-jerk” reaction to the report of the Chinese investigation. Copper for delivery in three months dropped as much as 2.8 percent, the most since July 16 in intraday terms, on the London Metal Exchange. The contract was down $104, or 1.4 percent, to $7,571 a metric ton at 10:41 a.m. local time. Copper for delivery in December slid 1.4 percent to $3.45 a pound on the Comex in New York. Rubber prices dropped the most in three months in Shanghai. The Securities Times, affiliated with China’s state-run People’s Daily, cited people it didn’t identify in the report on its website. ‘Warning Shot’ “The actions in China overnight are simply a warning shot to speculators,” Heath said. “Liquidation by a number of local brokers on hearing about the investigation unnerved the whole market.” All of the six main industrial metals traded on the LME declined. Zinc lost as much as 6.5 percent and lead dropped as much as 2.9 percent. China is the world’s largest copper user. The Beige Book underscored the Fed’s view that while the recovery from the worst recession in seven decades has cooled, the U.S. economy isn’t relapsing into a contraction. Concern about the strength of the recovery in the country has helped to hold back copper prices this year, along with a stronger dollar. Gains by the U.S. currency make dollar-priced raw materials more expensive in terms of other monies. The dollar index has advanced 6.1 percent in 2010. The global economic recovery is proving slower than projected and policy makers may need to extend or bolster stimulus programs to support it, the Organization for Economic Cooperation and Development said today. LME copper stockpiles dropped for a fifth day to 393,375 tons, the lowest level since Nov. 9, according to daily exchange figures. Inventories have slid 22 percent this year, helping to boost the metal to a four-month high of $7,750 a ton on Sept. 3. Orders to draw copper from LME inventories, or canceled warrants, declined for a sixth day, sliding 5.2 percent to 22,650 tons. That was the lowest level since Aug. 13. Aluminum for three-month delivery on the LME fell 0.9 percent to $2,140 a ton and nickel lost 0.8 percent to $22,710 a ton~. Zinc declined 2.2 percent to $2,170 a ton, tin was 0.8 percent lower at $21,500 a ton and lead dropped 1.5 percent to $2,201 a ton. To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

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