Copper jumped nearly two per cent to close at a three-week high, as confidence in Asian economic growth prospects and speculation that the Federal Reserve could stand ready to support the ailing US economy powered prices higher.
Unfazed by a one-per cent slide in US equities and a stronger dollar, copper climbed for a third straight day, as investors shifted their focus to an overnight rally in Asian markets and the surprising strength in shares of some banking heavyweights, which signaled to some that the world’s largest copper buyer was on firmer economic footing than its Western counterparts.
“Asian markets were up nicely overnight … we may be getting some relief from that,” said Frank McGhee, head precious metals trader with Integrated Brokerage Services LLC in Chicago.
Copper’s correlation with Shanghai Composite Index is at its strongest since early March.
London Metal Exchange (LME) three-month copper rose $US155 or 1.7 per cent to finish at $US9,030 per tonne, its priciest closing value since August 5.
In New York, the active December COMEX contract shot up 8.15 US cents to settle at $US4.0980 per lb.
Prices powered ahead even after data showed US unemployment benefits rose last week, which were inflated by striking workers at telecoms company Verizon.
“Throughout the day we’ve seen prices move higher, particularly this afternoon as the US came in. So there doesn’t seem to have been a particularly negative reaction to that data,” Gayle Berry, an analyst at Barclays Capital, said.
“Because the market has wound itself into a bearish ball it means that any data that comes in slightly better than expected is received well,” Berry said.
Sentiment improved after Bank of America said Warren Buffett’s Berkshire Hathaway would be taking a $US5 billion stake in the bank, whose shares had fallen to two-year lows earlier this week.
Still, prices of the metal remain 11 per cent below their mid-February records at $US10,190 in London and $US4.60 in New York.
“There’s still this expectation that China is going to surge in and buy lots of metal — but we haven’t seen much buying this week,” analyst David Wilson of Societe Generale said.
“The macro picture is no consumption growth in Europe and stalling growth in the US If I was a Chinese trader, I would be thinking prices should be going lower,” he added.
Highlighting the strength in demand for commodities, trading giant Glencore posted a 50 per cent rise in first-half profit despite tough trading markets and said it saw potential opportunities emerging from current market turbulence.
But investors are still wary ahead of an address by Federal Reserve Bank Chairman Ben Bernanke on Friday. Many are optimistic he will signal the Bank is ready to support the US’s ailing economy if necessary.
“This market is saying we think Bernanke is going to take some type of action, whether its QE3 or some other manner of pumping more liquidity into the market … the market is expecting an injection at this point,” said Matthew Zeman, head of trading with Kingsview Financial in Chicago.
World stocks fell and the dollar rose against a basket of currencies as Bernanke’s speech drew closer. A stronger dollar makes commodities priced in the unit less attractive to holders of other currencies.
Metal Prices at 1822 GMT (0422 AEST)
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
move
COMEX Cu 410.65 9.00 +2.24 444.70 -7.66
LME Alum 2365.00 1.00 +0.04 2470.00 -4.25
LME Cu 9030.00 155.00 +1.75 9600.00 -5.94
LME Lead 2401.50 53.50 +2.28 2550.00 -5.82
LME Nickel 20825.00 0.00 +0.00 24750.00 -15.86
LME Tin 23300.00 50.00 +0.22 26900.00 -13.38
LME Zinc 2228.00 50.50 +2.32 2454.00 -9.21
SHFE Alu 17320.00 45.00 +0.26 16840.00 2.85
SHFE Cu* 66790.00 320.00 +0.48 71850.00 -7.04
SHFE Zin 17085.00 175.00 +1.03 19475.00 -12.27
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
