UPDATE: Manufacturing, Corporate Gains Boost Industrial Commodities

NEW YORK, Jul 22, 2010 (Dow Jones Commodities News via Comtex) -- European manufacturing data helped propel growth-sensitive industrial commodities higher Thursday, while investor sentiment received an added boost from positive comments about the demand outlook from companies that use or produce these materials.

Copper prices, widely seen as an economic indicator because of the metal's use in construction and manufacturing, hit their highest point in nearly two months in U.S. trading. Other base metals such as aluminum, zinc, nickel, lead and tin were up strongly in London. Oil futures, also closely tied to economic cycles, neared $80 a barrel in New York.

These commodities have been under pressure in recent months amid concern that European sovereign debt problems could derail the continent's economic recovery. Although the economic outlook remains far from clear, Thursday's data showed the euro-zone purchasing managers index hit a three-month high--indicating strengthening growth in the region's manufacturing and services sectors and helping to dispel some of the concerns.

"The perception is that the economy is improving," said Frank Lesh, broker and analyst with FuturePath Trading in Chicago. "We shouldn't be as happy as we are. But for right now, ride the wave."

Benchmark U.S. copper futures for September delivery rose 7.15 cents, or 2.3%, to settle at $3.1645 a pound on the Comex division of the New York Mercantile Exchange. Light, sweet crude for September delivery settled up $2.74, or 3.6%, at $79.30 a barrel on Nymex. Nickel closed above $20,000 per metric ton, rising 3.9% on the London Metal Exchange.

The gains in commodities markets Thursday came as major U.S. stock indexes rose about 2%, spurred by economic data and a slew of positive earnings reports from major companies.

Companies whose fortunes are closely linked to commodities prices and consumption have posted strong quarterly numbers and sounded upbeat notes about the economic outlook and its implications for industrial demand.

"The industrial companies are really coming out with some surprising earnings," said Craig Ross, vice president of brokerage ApexFutures.com in Chicago.

He said this is an indicator of underlying demand for metals like copper. "It's not just a pure speculative rally," he said. "It's got some legs to it."

Caterpillar Inc. (CAT) said Thursday second-quarter profit soared 91% on increased demand for construction equipment from developing countries and improved profit margins. The world's largest maker of construction machinery raised its full-year earnings and sales outlooks and largely dismissed the likelihood of a double-dip recession in the U.S. and Europe.

The Peoria, Ill., company also forecast that copper prices will average more than $3 per pound this year and oil about $80 a barrel.

"Growth in the world economy is driving improved demand for commodities," the company said. "Mining-related order activity has remained robust, and we expect to increase production and sales as the year progresses."

Also Thursday, the largest U.S. steelmaker by volume, Nucor Corp. (NUE), said it swung to a profit in the second quarter, despite an inventory-accounting charge, on higher sales and as steel prices rose from last year.

From Europe, ABB Ltd. (ABB, ABB.SK) said it's seeing the first signs of a broader market recovery amid a pickup in demand for industrial and infrastructure projects. Europe's largest electrical engineering company by sales said that it has received large orders in recent months to install and produce power transmission lines and equipment for production in areas such as minerals, pulp and paper.

On Wednesday Phoenix-based Freeport-McMoRan Copper & Gold Inc. (FCX), the world's largest publicly traded copper company, said second-quarter profit rose 2.5% amid a year-over-year rise in metals prices that has prompted the company to consider ramping up production idled during the economic downturn.

Last week, aluminum giant Alcoa Inc. (AA) kicked off earnings season by reporting a swing to profitability in the second quarter on higher sales volumes and prices compared with a year earlier. It raised its outlook for global aluminum consumption this year.