Oct 26, 2011 NEW YORK (Dow Jones)--Copper futures rose to their highest levels in five weeks on Wednesday as optimism that euro-zone officials would stave off a credit crunch drew investors back to the downtrodden market.
The most actively traded copper contract, for December delivery, rose 6.95 cents, or 2%, to settle at $3.49 a pound on the Comex division of the New York Mercantile Exchange, the highest settlement price since Sept. 21.
European Union leaders met Wednesday in a high-profile effort to outline a plan to deploy the currency union's bailout fund, provide a backstop for debt-laden Greece and shore up the region's financial system.
Metals markets, and copper in particular, were some of the hardest-hit assets as fears mounted in recent months that Europe might be sliding toward a credit crunch. Investors worried that, if bank lending dried up, consumers might not be able to finance purchases of industrial metals.
The view that European officials were well on their way toward reassuring the battered financial system eased the pressure on industrial metals Wednesday.
Copper had jumped by more than 4% earlier Wednesday after German lawmakers approved an expanded mandate for the euro zone's bailout fund. The news wasn't unexpected, but it raised hopes that the summit of EU leaders later in the day would go well.
"After the German vote came around, that was a sign that the tone would be positive," said Bob Haberkorn, a senior market strategist with MF Global. "The euro scenario is starting to come to a head here."
If the summit goes as planned, "it's very bullish for metals," Haberkorn added.
The euro surged to a six-week high against the U.S. Dollar after the news, easing the pressure on dollar-denominated copper futures. A weaker dollar makes futures cheaper for buyers using other currencies.
Copper prices later pared their gains along with the falling euro as investors began to hedge their bets that a quick fix to what ails the currency union was imminent.
"Although supply-side developments are very supportive for copper prices, investors are more concerned with demand prospects at this stage," MF Global analyst Edward Meir said in a note.
Supply developments were again supportive Wednesday, as Freeport-McMoRan Copper & Gold Inc. (FCX) invoked force majeure, a contract provision allowing it to suspend shipments from its Grasberg mine in Indonesia. An ongoing labor strike there has "impacted our ability to fully perform our sales commitments," said Ramdani Sirait, a spokesman for Freeport's Indonesian subsidiary.
Copper prices were supported for much of the last year by the view that copper supply would fall short of rising global demand.
Copper settlements (ranges include electronic and pit trading):
Oct $3.4880; up 6.90 cents; Range $3.4875-$3.5725
Dec $3.4900; up 6.95 cents; Range $3.3960-$3.5880