BASE METALS: NY Copper Rises On China PMI, Strong Equities

Aug 23, 2011 NEW YORK (Dow Jones)--An increased investor appetite for risky assets and a pair of better-than-expected readings on global manufacturing pushed copper futures higher Tuesday.

The most actively traded contract, for September delivery, rose 4.05 cents, or 1%, to $3.996 a pound on the Comex division of the New York Mercantile Exchange. Futures didn't show a strong reaction to the earthquake that shook buildings in New York and Washington during electronic trading after the settlement.

Manufacturing activity in China contracted by less than expected in August, HSBC Holdings Plc. said Tuesday, and euro-zone purchasing managers held a brighter-than-expected outlook this month, luring some buying to the copper market.

China's reading stood at 49.8 in August, from 49.3 in July, while the euro-area's composite PMI at 51.1 in August, better than forecast for a reading of 50.0.

Copper is particularly sensitive to the economic outlook because of its widespread uses in construction and manufacturing, and prices can receive a boost when investors are increasing their holdings in risky assets such as stocks and bonds.

Global equities markets were mostly stronger Tuesday, with the Dow Jones Industrial Average up 240 points at 11094 at the close of Comex floor trading.

Copper futures came under pressure beginning in late-July from signs of a slowdown in global growth, sliding from near $4.50 a pound to below $3.90 a pound earlier this month as traders reassessed their view of likely copper demand.

The chief financial officer of Chilean state-owned copper giant Corporacion Nacional del Cobre de Chile said Tuesday that copper prices are likely to hold near $4 a pound, underpinned by strong demand from emerging market nations.

"We'll see significant market fluctuations, but core demand will keep prices at the same levels we're seeing today," Thomas Keller said, downplaying the chances of a rise toward $5 a pound.

Copper futures were supported for much of the year by the view that mine supply won't be able to keep up with rising demand, particularly from industrializing countries such as India and China.

Traders are likely going to exercise caution ahead of Federal Reserve Chairman Ben Bernanke's speech Friday in Jackson Hole, Wyo. Investors are expected to keep a close watch for signs of additional measures to stimulate the economy, and speculation that the Fed may announce such steps has lent support to risky assets this week.

"Copper is going to sit in this range until Friday," said Bob Haberkorn, a senior market strategist with MF Global. "Until then, we're going to trade on [investor] sentiment with stocks."

Copper settlements (ranges include electronic and pit trading):
Aug $3.9945; up 3.85 cents; Range $3.9945-$3.9945
Sep $3.9960; up 4.05 cents; Range $3.9930-$4.0380