Copper Gains on Equities Rally

MANILA, July 14 -- Shanghai copper rose 1.4 percent on Tuesday and London prices stretched the previous session's gains as investors brushed aside demand worries and followed a rally in Asian equities.

    Asian stocks bounced as a rally in U.S. financial shares helped Japan break a 10-session losing streak.

    "When Asia's stock markets are up like this, base metals are obviously going to benefit," said broker Ciaran Moore at Halifax Investments.

    Asian shares took their cue from U.S. stocks, which jumped more than 2 percent on Monday, as bullish comments from analyst Meredith Whitney raised hopes that banks' quarterly results may be stronger than expected.

    Shanghai copper for September delivery rose 550 yuan to 39,640 yuan ($5,804) a tonne by 0253 GMT, after falling 1 percent on Monday. The most-active October contract added 520 yuan to 39,420 yuan.

    Three-month copper on the London Metal Exchange rose $20 to $4,915 a tonne, adding to Monday's $35 gain.

    Prices of the metal used in power and construction have risen nearly 61 percent in London and 66 percent in Shanghai so far this year, thanks largely to Chinese stockpiling.

    While many analysts point to expectations of slowing Chinese demand in coming months as the main factor that could weigh on base metals prices in the short term, the opening again of the arbitrage window shows there could be further room for large-scale Chinese buying.

    Shanghai copper's premium over the LME metal stood at 350 yuan on Tuesday, including China's 17 percent VAT, after widening to nearly 600 yuan in the previous session.

    And a likely increase in U.S. car production in the current quarter could be another boost to global demand for base metals.

    Barclays Capital estimates that a 400 percent seasonally-adjusted growth in car assemblies in the third quarter could lead to an increase in U.S. auto production of up to 1.5 million units during the quarter.

    That would result in "close to a 1 percent increase in copper, zinc and lead global demand levels in the third quarter, with a more significant 2.3 percent in aluminum," Barclays Capital analyst Nicholas Snowdon said in a note.

    That should ease aluminium stocks at LME warehouses which surged to a record above 4.4 million tonnes on Monday.

    (Source: Reuters)