BASE METALS: ECB's Liquidity Measures Boost Comex Copper

Sep 15, 2011 NEW YORK (Dow Jones)--Copper futures cemented their gains on the back of the European Central Bank's move to add liquidity into Europe's banking system.

The ECB announced a coordinated push between the U.S. Federal Reserve, Swiss National Bank, Bank of Japan and the Bank of England to improve access to dollars by European banks.

The new measures, coming amid reports that some of Europe's largest banks are struggling to get funding, eased fears that these problems would spread through the banking system and impede business activity.

The ECB's move "brightens the outlook for the economic recovery and hence buoys the price of industrial metals, such as copper," said Dave Meger, director of metals trading at Vision Financial.

Copper, which is widely used in construction and manufacturing, has been under pressure in recent weeks because of concerns that Europe's debt crisis would stymie the region's demand for the metal. Europe is often second, behind top copper consumer China, in global demand for copper.

Copper for December delivery, the most actively traded contract, settled 5.90 cents higher, or 1.5%, at $3.9570 a pound on the Comex division of the New York Mercantile Exchange. The contract set the day's highs at $3.9800 after the ECB announcement, well above Wednesday's settlement price of $3.8980, the lowest settlement level this year.

Thinly traded September-delivery copper gained 6.00 cents, or 1.5%, to settle at $3.9450 a pound.

"This says that maybe Europe does not implode. We've taken some fear out of the market today and that trade is being unwound," said Frank Lesh, broker and futures analyst with FuturePath Trading in Chicago.

Copper futures roared to a high of $3.9800 a pound as traders flocked to purchase the industrial metal after the ECB announcement.

Copper is widely considered an economic bellwether with changes in price direction indicating shifts in the economic cycle. The red metal is used in making everything from laptops and air conditioners to household plumbing and tractors, and demand for copper tends to wane when business activity slows.

"There is much debate at the moment about how much of an impact on demand the current sovereign debt crisis will have and many have become convinced we are headed for another recession which will be negative for base metals," said traders at RBC Capital Markets.

Copper settlements (ranges include electronic and pit trading):
Sep $3.9450; up 6.00 cents; Range $3.8945-$3.9620
Dec $3.9570; up 5.90 cents; Range $3.8940-$3.9800