Copper snapped a six-day decline after China reduced reserve requirements for banks, fueling speculation the move may spur economic growth and boost metals demand. Zinc, lead and nickel also advanced.
Three-month copper increased as much as 2.7 percent, the most in two weeks, to $8,396.50 a metric ton and traded at $8,290 by 3:14 p.m. Shanghai time. The contract fell for six consecutive days since Feb. 10, the longest losing streak since September. May-delivery copper on the Comex climbed 1.5 percent to $3.772 a pound.
The proportion of cash that Chinese lenders must set aside will fall half a percentage point from Feb. 24, the People’s Bank of China said Feb. 18 on its website. This is the second reduction in three months as the nation tries to sustain growth as the housing market cools and Europe’s sovereign-debt crisis weighs on exports.
“While the cut suggests that policy makers may be mildly concerned over the slowing pace of economic activity, overall, we think the RRR cut will most likely result in an acceleration of economic activity and that China’s first-quarter growth is likely to surprise us on the upside,” Mark Pervan and Natalie Robertson, analysts at Australia & New Zealand Banking Group Ltd., said in a report today.
The May-delivery contract on the Shanghai Futures Exchange closed 0.7 percent lower at 59,340 yuan ($9,421) a ton. Managed-money funds held net-long positions, or wagers on rising copper prices, were 14,817 futures and options contracts as of Feb. 14, versus 12,298 a week earlier, according to the U.S. Commodity Futures Trading Commission.
On the LME, aluminum rose 0.7 percent to $2,178 a ton, zinc gained 2.9 percent to $2,001.25 a ton and lead climbed 1.4 percent to $2,074 a ton. Nickel advanced 1.4 percent to $19,901 a ton and tin rose 1.9 percent to $23,900 a ton.