Copper Surges to Seven-Week High on Signs of Recovering Growth By Millie Munshi
Jan. 26 (Bloomberg) -- Copper surged to a seven-week high on signs of improved economic activity, raising speculation demand will increase for the metal used in pipes and wires.
Home resales unexpectedly rose 6.5 percent in the U.S. last month, the National Association of Realtors said today. The index of leading U.S. economic indicators also advanced in December, a separate report showed. Copper has gained 13 percent this year on speculation that government spending on building roads, bridges and power lines will boost demand.
“There’s some bullishness coming back to commodities and copper is following that trend,” said Donald Selkin, the chief market strategist at National Securities Corp. in New York. “People felt that the economy is going to start to turn around and that’s going to help out copper prices.”
Copper futures for March delivery soared 11.45 cents, or 7.8 percent, to $1.5865 a pound on the New York Mercantile Exchange’s Comex division. Earlier, the metal touched $1.631, the highest since Dec. 2.
Sales of previously owned homes rose to an annual rate of 4.74 million from 4.45 million in November, the Realtors’ group said. The home resales were forecast to fall to a 4.4 million rate, according to the median estimate of 70 economists in a Bloomberg News survey. Builders are the biggest copper consumers.
“We saw an immediate, dramatic reaction to the upside” in metal and equity markets after home-sales figures were released, said Brian Hicks, who helps manage about $1.5 billion at San Antonio-based U.S. Global Investors. “That’s encouraging.”
Citing reports of job cuts today, U.S. President Barack Obama called for quick action on an $825 billion stimulus package in a bid to revive the recession-racked economy. Lawmakers in Congress are debating the stimulus plan.
Stimulating Effect
“The government is going to work hard to stimulate the economy and that’s going to help the overall sentiment in the market,” said Michael K. Smith, president of T&K Futures & Options in Port St. Lucie, Florida. “Copper is starting to find a bottom.”
Caterpillar Inc., the world’s largest maker of construction and mining equipment, cut 20,000 jobs today, citing declines in U.S. construction work. Home Depot Inc., the biggest home-improvement retailer, eliminated 7,000 jobs because of falling consumer spending. U.S. builders started work last month on the fewest new houses since record-keeping began 50 years ago.
“Most commodity prices dropped below investment-threshold levels in late 2008,” Caterpillar said today in a statement. “We expect this unfavorable environment to persist throughout the year.”
Copper has plunged 63 percent from a record $4.2605 in May as the U.S., Europe and Japan fell into recessions. Weak global growth will continue to limit copper’s gains, said Selkin of National Securities.
Profit Cut
Lower metal prices have hurt profits for mining companies including Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer. Freeport today posted a $13.9 billion fourth-quarter loss as copper plunged and the company wrote down the value of some mines and other assets. The company said sales of copper will be 9 percent less this year than previously forecast.
“Business is weak because of the global economic situation,” Freeport Chief Executive Officer Richard Adkerson said today on a call with investors. Still, continued infrastructure development in the U.S. and China will buoy copper prices in the longer term, Adkerson said.
On the London Metal Exchange, copper for delivery in three months jumped $304, or 9.4 percent, to $3,555 a metric ton ($1.61 a pound). The price reached a record $8,940 on July 2.
PNA Price at posting:
14.2¢ Sentiment: Buy Disclosure: Held
