Copper Heads for Biggest Two-Day Gain in 22 Years on Bank Plan

By Glenys Sim

Oct. 14 (Bloomberg) -- Copper in London headed for the biggest two-day gain in at least 22 years leading a rally in base metals, on plans by U.S. and European governments to buy stakes in banks and flood the global financial system with cash.

Copper gained as much as 7.5 percent as the Bush administration is expected to announce a plan to spend about half of a total $250 billion for stakes in nine major banks, according to people briefed on the matter. Financial markets rebounded on the news with U.S. stocks posting the largest rally yesterday in seven decades. Commodities gained.

``In the short term, these measures help bring some stability to the markets, however global economies are still headed for a slowdown in the longer term and this will likely put a lid on prices,'' Liu Buyuan, an analyst at GF Futures Co., said today from Guangzhou.

The metal for delivery in three months rose as high as $5,500 a metric ton, and traded 6.4 percent higher at $5,440 at 10:05 a.m. Singapore time, extending yesterday's 6.8 percent climb. The contract has gained 13.6 percent over the past two days, the most since at least 1986, according to Bloomberg data.


Copper for December delivery on the Shanghai Futures Exchange climbed by as much as the 6 percent daily limit from the previous settlement price, to 44,190 yuan ($6,479) a metric ton and last traded at 43,660 yuan.

The most-active contract had fallen the daily limit for the past five sessions to reach the lowest since Dec. 2005 yesterday. Shanghai aluminum and zinc contracts also gained today by their daily limits, with aluminum adding 5 percent to 14,530 yuan a ton and zinc advancing 4 percent to 12,125 yuan.

`Fresh Buying'

``We're seeing a combination of a little fresh buying and some short covering on the back of recent developments,'' said Liu. Short covering is the buying back of previously sold contracts to close a short position, which is a bet that prices will fall.

European countries committed $1.8 trillion to guarantee bank loans and Australia said it will guarantee all bank deposits to prevent a financial system collapse.

Among other LME-traded metals, aluminum was up 1.8 percent at $2,290 a ton, zinc rose 1.1 percent to $1,495, lead climbed 4.2 percent to $1,630, nickel added 1.2 percent to $12,950 and tin advanced 1.8 percent to $14,790 of 9:58 a.m. in Singapore.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net