Copper in Shanghai rallied after falling 11 percent in four days and London prices extended yesterday’s gains as China’s clarification on price controls improved investor confidence and as the dollar weakened. February-delivery metal on the Shanghai Futures Exchange climbed as much as 2.3 percent to 62,950 yuan ($9,478) a metric ton and closed at 62,290 a ton for midday break. The three-month delivery contract in London advanced as much as 1.2 percent to $8,290 a ton and traded at $8,280 at 12:40 p.m. in Shanghai. Zinc gained 2.4 percent. “As news about how Beijing plans to curb inflation came out, it helped to alleviate the policy uncertainties, giving some relief to the market,” Ren Gang, an analyst at Maike Futures Co., said by phone from Shanghai. China’s State Council said on its website last night that price caps will be used on “important daily necessities” and production materials if necessary, following a meeting chaired by Premier Wen Jiabao. The cabinet pledged to stabilize natural gas prices, crack down on speculation in farm products and ensure the supply of vegetables, grain, cooking oil and sugar. “Short-position holders chose to lock-in profits, and the relatively low open interest and trading volumes amplified the price move,” Ren said. “We need to wait for a few days to see how the physical markets react.” Cash Market Copper traded on Changjiang, Shanghai’s largest nonferrous metals market, was quoted around 62,050 yuan a ton today, or a discount of 50-150 yuan to Shanghai’s front-month futures contract. China sold 16,353 tons of lead ingots offered at a state auction on Nov. 16, the National Development and Reform Commission said in a statement on its website today. The metal was sold at an average price of 17,030 yuan a ton, it said. The U.S. currency declined against 13 of its 16 major counterparts on speculation the Federal Reserve will follow through on its stimulus plan to buy $600 billion in bonds. The Dollar Index, which tracks the greenback against a basket of currencies, dropped as much as 0.4 percent to 78.773. “Following the steep losses in the past few days, the dollar’s retreat since yesterday seems to be at least partially and temporarily offsetting the tightening worries,” said Li Peiying, an analyst at Essence Futures Co., by phone. Aluminum in London rose 0.9 percent to $2,297 a ton, and lead gained 1.3 percent to $2,295 a ton. Nickel increased 1.5 percent to $21,869 a ton, and tin advanced 1.5 percent to $25,129 a ton at 12:43 p.m. in Shanghai. --Helen Sun. Editors: Richard Dobson, Matthew Oakley. To contact the Bloomberg News staff on this story: Helen Sun in Shanghai at hsun30@bloomberg.net To contact the editor responsible for this story: James Poole at jpool4@bloomberg.net

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