copper rises for 2nd day

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Metals - Copper rises for 2nd day as higher equity mkts boost sentiment UPDATE
Mon, Nov 26 2007, 10:19 GMT
http://www.afxnews.com

LONDON (Thomson Financial) - Copper rose for a second day on stronger equity markets and general dollar weakness following a recent sell-off which took the metal to an eight-month low last week.


Higher equity markets boosted metal prices which have been closely following wider financial markets in recent months for signs of future demand. Economic weakness is likely to soften metals demand as liquidity dries up, players believe.


Meanwhile, general dollar weakness, with the greenback close to a record low against the euro, spurred buying as commodities denominated in the US currency became cheaper for those trading in other currencies.


Elsewhere, gold, oil and platinum were all up too, which boosted general sentiment towards commodities.


Copper has lost some 15 pct since mid-August, however, as a US-led credit crunch forced players to sell off in a bid to raise cash.


Traders also felt that should such economic stress continue, physical metals demand is likely to falter, especially because problems in the US housing sector, which relies on metal, was mostly to blame for the crunch. Copper, for instance, is used extensively in pipes and wires.


"Although most metals still look oversold, sentiment remains fragile, and the complex is susceptible to further risk aversion sales and technical liquidation," warned an analyst at BaseMetals.Com. "But there are some tentative signs that shattered confidence is beginning to pick up, although solid advances will be difficult to sustain."


Rising copper stocks, as seen by a daily LME report, have also hammered down the red metal's value as not only is the data a sign of ample inventory, it is evidence that demand is weaker than expected.


Today's LME report showed copper stocks rose for the 15th day in a row -- by 975 -- and now stand at 187,400 tonnes.


At 9.52 am, LME copper for three-month delivery was up at 6,755 usd per tonne against 6,710 usd per tonne at the close Friday.


While copper's near-term outlook is clouded by wider economic stress, most analysts agree the metal's longer-term demand prospects will be underpinned by India, China and other fast-industrialising nations.


"It is important to recognise that the US is now significantly less important in world commodity demand than it was just five years ago," said Rio Tinto chief economist Vivek Tulpule. "Even a sharp slowing in the US economy would have only a small impact on Chinese and Indian economic growth and consequent demand for commodities," he said.


Earlier today, UBS said copper -- often seen as a barometer of economic strength -- is likely rise to 7,200 usd a tonne by the end of this year.


Copper remains strong fundamentally, with secular demand trends from emerging markets like India and China, said UBS.


"On the supply side, we expect that the market will continue to overestimate supply growth as mines experience labour disruption, falling grades, cost inflation pressures and face political risks."


Elsewhere, zinc was up at 2,320 usd a tonne against 2,275 usd. Lead was higher at 3,063 usd against 2,925 usd.


Nickel was up at 29,400 usd a tonne against 29,100 usd, aluminium was up at 2,498 from 2,495 usd while tin rose to 16,800 usd from 16,650 usd.


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