Nov 30, 2011 NEW YORK (Dow Jones)--Copper futures surged to their highest levels in more than three weeks on Wednesday, as coordinated moves by major central banks to stabilize the global financial system lured buyers to the battered market.
The most actively traded contract, for March delivery, rose 18.5 cents, or 5.5%, to settle at $3.5755 a pound on the Comex division of the New York Mercantile Exchange, the highest settlement price since Nov. 4.
Futures at their highs Wednesday were up by more than 7%, fueled by upbeat U.S. economic data, looser credit conditions in China and coordinated central bank action to boost global liquidity.
The Federal Reserve, European Central Bank and four other developed-world central banks said Wednesday they had agreed to lower the price on existing dollar liquidity swap arrangements, making dollar funding cheaper for banks that hold dollar-denominated assets or make loans in the currency. In a separate move, the People's Bank of China earlier Wednesday said it would decrease the amount of money lenders must deposit with the central bank, effectively increasing the availability of cash in the country.
The news sparked rallies in equities and growth-sensitive commodities as investors bet that the developments limited the chance of an imminent euro-zone credit squeeze. Better-than-expected readings on Chicago-area manufacturing and U.S. private-sector hiring also helped lift sentiment.
"U.S. economic reports are all showing growth, and central banks are taking a stance that they're not going to let (the financial system) fail," said Zach Oxman, managing director with Trendmax, a brokerage. "Growth may be back in the picture."
Copper is sensitive to the economic outlook because of its widespread use in construction and manufacturing, and prices have closely tracked investor sentiment toward the euro-zone debt crisis. The currency union is the second largest consumer of the metal after China, and a financial crisis there could rattle demand worldwide.
Copper's rise also came as some speculators reversed their bearish bets on the market, Oxman said. Money managers have been mostly bearish on the metal in recent weeks amid mounting worries that Europe's financial woes and tight credit conditions in China could upset industrial demand.
"Concerns regarding the euro-zone over the last several weeks had kind of acted as a resistance level above the market. Lifting this fear is allowing copper to move higher," said Dave Meger, head of metals trading at Vision Financial.
Traders welcomed the China move in particular, which was seen as a signal that the world's top copper consumer was easing the tight credit policies that had limited the ability of manufacturers to finance metals purchases.
Copper settlements (ranges include electronic and pit trading):
Dec $3.5630; up 18.70 cents; Range $3.2960-$3.6200
Mar $3.5755; up 18.50 cents; Range $3.3050-$3.6350