- Aluminum, nickel, zinc, tin and lead also advance on LME
- `Far from certain that the market's bottomed,' O'Neill says
Copper rebounded from a six-year low as China, the world’s top metals user, cut interest rates to spur economic growth and stem a rout in its equities that sent shock waves through global financial markets.
The People’s Bank of China’s fifth rate cut since November and its move to lower the amount of cash banks must set aside, also spurred a rally in equities and emerging market currencies. In the U.S., the second-largest copper user, purchases of new homes rebounded in July. Builders are the biggest consumers of the metal.
“We have a generally better tone in the market today,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “The Chinese rate cut was somewhat expected, but it’s helpful to the market. It’s far from certain that the market’s bottomed. It’s much too soon to say that.”
Copper for delivery in three months gained 2.3 percent to $5,065 a metric ton ($2.30 a pound) at 5:50 p.m. on the London Metal Exchange. On Monday, prices touched $4,855, the lowest since July 2009.
A collapse in Chinese stocks Monday shook global markets and sent a gauge of commodities returns to the lowest since 1999.
"This is a natural snap reaction to a rate cut," Malcolm Freeman, director of West Malling, England-based metals brokerage Kingdom Futures Ltd., said by telephone. "You would expect that to increase consumers’ purchasing of durable goods, and to spur on construction, all of which consume varying metals. But at the end of the day it doesn’t mean all of a sudden people will start building things. Some of the rallies are already losing ground."
Copper for immediate delivery is trading at a $33 premium to the metal for delivery in three months, the biggest spread since Jan. 30. A situation where earlier-dated contracts are more expensive than later ones can signal supplies may be limited. Orders to remove the metal from LME-tracked warehouses have risen to the highest since July.
On the Comex, copper futures for December delivery gained 2.3 percent to $2.3005 a pound. On the LME, aluminum, nickel, zinc, tin and lead also advanced.