Copper Declines on Speculation Largest Advance in a Month Was Exaggerated
Copper fell in New York and London on speculation prices climbed too high yesterday, when they jumped the most in a month after China signaled an end to its currency’s fixed exchange rate against the dollar.
Copper declined as much as 1 percent on the Comex in New York. A report tomorrow may show sales of new homes in the U.S., the world’s second-biggest user of the metal, slid 21 percent last month, adding to figures that indicate a slowing market. Construction accounts for a quarter of copper demand, according to the Copper Development Association.
“The Chinese story is out of the way now,” said Steve Hardcastle, a Sucden Financial Ltd. analyst in London. “Metals will trade sideways to lower, looking for the next macroeconomic influence.”
Futures for September delivery dropped 1.5 cents, or 0.5 percent, to $2.9445 a pound at 8:21 a.m. on the Comex. The contract rose as much as 5.1 percent yesterday, the most since May 21. Copper for delivery in three months fell 1.6 percent to $6,500.75 a metric ton on the London Metal Exchange.
Prices gained yesterday on speculation that a stronger yuan might fuel demand for raw materials in China, the largest copper consumer, and on a weaker dollar. Declines by the U.S. currency make dollar-priced metals cheaper in terms of other monies.
September Delivery
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fluctuated today, declining as much as 0.2 percent and gaining as much as 0.4 percent. It lost as much as 0.7 percent yesterday. The index has added 11 percent this year, contributing to LME copper’s 12 percent retreat.
Sucden’s Hardcastle predicted support for metals, noting that three-month copper purchased now will be delivered in late September. Prices tend to increase after summer in the Northern Hemisphere as manufacturing activity strengthens following holiday and maintenance shutdowns.
“I’m not expecting any real weakness, and I think we will consolidate to form a base here in order to move higher later in the year,” Hardcastle said.
Business confidence in Germany, the third-largest copper user, unexpectedly increased in June. The Ifo institute said its business climate index rose to 101.8 from 101.5 in May. Economists expected a decline to 101.2, according to the median of 38 forecasts in a Bloomberg News survey.
‘Pleasant Surprise’
“The number when it came in was a pleasant surprise,” said Alex Heath, head of industrial-metals trading at RBC Capital Markets in London. “These things are not so helpful, though, as business sentiment is a transient issue without form or real substance.”
Tomorrow’s report on U.S. new-home sales will give a better sense of the state of the economy, Heath said. The Commerce Department will say sales fell to a 400,000 annual pace last month, according to the median forecast of economists surveyed by Bloomberg News.
Housing starts last month dropped by the most since March 2009 and building permits, a sign of future construction, fell to a one-year low, data from the Commerce Department showed. The National Association of Home Builders/Wells Fargo confidence index for June fell the most since November 2008.
Figures due at 10 a.m. New York time today will show that U.S. sales of previously owned homes rose in May to the highest level in six months, economists said. Purchases increased 6 percent to a 6.12 million annual rate, according to the median of 73 forecasts in a Bloomberg News survey.
Nickel for three-month delivery on the LME fell 2 percent to $19,450 a ton, aluminum dropped 1.5 percent to $1,932 a ton and zinc slipped 0.7 percent to $1,762 a ton. Lead shed 2.2 percent to $1,793 a ton and tin gained 0.6 percent to $18,000 a ton.
Stockpiles of copper tracked by the LME were little changed at 456,850 tons. Bookings to remove metal from warehouses fell 1.8 percent to 28,950 tons.
To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.
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