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Copper Advances to 10-Month High on Hopes of Economic Recovery

By Glenys Sim

Aug. 3 (Bloomberg) -- Copper in London, Shanghai and New York jumped to the highest in 10 months, leading an advance in industrial metals, as the U.S. economy shrank less than expected and a Chinese manufacturing index climbed to a one-year high.

Copper for three-month delivery surged as much as 4 percent, bringing the gain this year to more than 90 percent, on optimism that stimulus efforts by governments will revive demand for raw materials. Economists are expecting reports this week to show employers in the U.S. cut jobs at a slower pace in July and that the manufacturing slump is easing, according to surveys.

“Risk appetite is returning to the market in a big way, spurred by very encouraging economic data out of the U.S.,” said Zeng Chao, analyst at Everbright Futures Co.

Copper for three-month delivery on the London Metal Exchange surged to $5,946.75 a metric ton, the highest price since Oct. 6, before trading at $5,884.50 at 3:35 p.m. in Singapore. The metal gained for a seventh month in July, advancing 15 percent to cap the longest winning streak since the eight-month rally ended January 2006.

Copper for September delivery on the Comex division of the New York Mercantile Exchange rose as much as 3.4 percent to $2.7130 a pound, the highest price for a most-active contract since Oct. 3. November-delivery copper on the Shanghai Futures Exchange gained as much as 6 percent to 47,880 yuan ($7,009) a ton, the highest price since Oct. 7, and closed at 47,200 yuan.

Improving Data

The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 52.8 from 51.8 in June, CLSA Asia-Pacific Markets said today in an e-mailed statement. That was the fourth monthly expansion. A government-backed manufacturing index released Aug. 1 also showed manufacturing expanded.

U.S. gross domestic product shrank at a better-than- forecast 1 percent annual pace after a 6.4 percent drop the prior three months, adding to recent signals indicating an improvement in the global economy. China and the U.S. are the world’s two largest consumers of industrial metals.

The most severe recession in at least five decades may be ending and growth in the U.S. may resume at a rate faster than most economists foresee, former Federal Reserve Chairman Alan Greenspan said yesterday.

Chinese metals demand growth continued to accelerate in June, with apparent demand for most commodities, which doesn’t take into account non-reported stockpile changes, hitting a record high, according to Macquarie Bank Group Ltd.

“While non-reported stockpile building is a cause for concern, it is not impacting sentiment at the moment as it is being offset by the growing belief in an economic recovery, and resulting metals demand recovery, in the rest of the world through the second half of the year,” the bank’s analysts led by Max Layton said in a report today.

“We estimate that there has been a refined copper stock build of around 300,000-400,000 tons so far this year, including 50,000 tons at State Reserve Bureau warehouses, 60,000 tons at bonded warehouses, 60,000 tons on the Shanghai Futures Exchange and the rest sitting at the fabricators,” said Layton.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aI1BENv7kw.M

GLTA !!