Copper May Advance in New York on Higher Equities, Contracting Inventories

Copper may rise for a second day in New York on a weaker dollar, gains by equities on an upbeat outlook from Intel Corp. and the biggest drop in inventories in more than four months.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell for a second day. The MSCI World Index of shares climbed for a second day, also helped by better- than-expected earnings from Alcoa Inc. and CSX Corp. yesterday. Copper stockpiles tracked by the London Metal Exchange dropped the most since March 4 today.

“The dollar came under pressure overnight in reaction to some more solid corporate earnings results in the U.S.,” Alex Heath, head of industrial-metals trading at RBC Capital Markets in London, said by phone. Still, while rising equity markets and the sliding dollar helped gains, they “would not be enough to sustain any real rally yet,” he said.

Futures for September delivery gained 0.8 cent, or 0.3 percent, to $3.0255 a pound at 8:45 a.m. on the Comex in New York. Copper for delivery in three months slipped 0.1 percent to $6,679 a metric ton on the LME.

A weaker dollar makes metals priced in the currency cheaper in terms of other monies. The dollar index dropped as much as 0.2 percent after yesterday’s 0.7 percent retreat. It’s still up 7.2 percent this year, contributing to LME copper’s 9.3 percent slide.

Intel, ASML

The MSCI index added as much as 0.5 percent after Intel, the world’s biggest chipmaker, yesterday raised its profit forecast for the year to a record after businesses resumed spending on computers.

Equities also gained today as ASML Holding NV, Europe’s biggest maker of semiconductor equipment, reported second- quarter profit that beat analysts’ predictions and forecast 2010 sales will rise to a record level as chip companies boost spending.

Copper stockpiles monitored by the LME fell for a 19th day, sliding 0.9 percent to 428,500 tons, the lowest level since Nov. 23. They are down 15 percent this year and headed for the first annual drop since 2004. Bookings to remove metal from LME warehouses rose after four declines in a row, gaining 4.4 percent to 28,375 tons.

Escondida Output

Rio Tinto Group said its share of mined copper from Chile’s Escondida, the world’s largest producer, rose 6.3 percent to 81,000 tons in the second quarter as it mined higher ore grades. Its share of refined copper dropped to 23,100 tons, partly because of maintenance activities, the company said in a statement today.

Aluminum for three-month delivery on the LME rose 1.2 percent to $2,018 a ton. LME-monitored inventories dropped for a fifth day to 4.38 million tons, the lowest since June 29, 2009.

Immediate-delivery metal’s discount to the three-month price, the so-called contango, narrowed to $19.75 yesterday, the lowest closing level in almost a year and down from $20.25 in the prior session.

Lead rose 0.1 percent to $1,827.25 a ton and nickel was little changed at $19,551 a ton. Zinc slid 1 percent to $1,846 a ton and tin added 0.3 percent to $18,050 a ton.

To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

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