Copper Prices Rebound as U.S. New Home Sales Unexpectedly Climb

By Millie Munshi

Oct. 27 (Bloomberg) -- Copper jumped the most in two weeks after sales of new houses in the U.S. unexpectedly rose in September, easing concern that a recession would damp housing demand.

Home purchases rose 2.7 percent last month to an annual rate of 464,000, the Commerce Department said today. Economists had forecast sales would drop to 450,000 annually, according to the median of 59 forecasts in a Bloomberg survey. Builders are the biggest users of copper pipes and wires.

``The home report definitely gave the market a little bit of a bump,'' said Michael Gross, an analyst at OptionSellers.com in Tampa, Florida. ``People are looking for any type of positive news right now.''

Copper futures for December delivery rose 11.85 cents, or 7 percent, to $1.805 a pound on the Comex division of the New York Mercantile Exchange. That's the biggest gain for most- active contract since Oct. 13.

The metal also rose today as equities rebounded, Gross said. The Standard & Poor's 500 Index rose as much as 1.9 percent, after earlier dropping as much as 2.4 percent. Traders follow stocks as a gauge for the economic outlook.

Demand Concern

Earlier, the copper price touched $1.6265, the lowest for a most-active contract since Sept. 19, 2005, as concern mounted that demand would decline.

Copper has plunged 37 percent in October, heading for the sharpest monthly drop since 1988, when the metal started trading in New York. About $12.2 trillion has been erased from the value of global equities this month as $680 billion of writedowns and credit losses triggered a credit freeze.

``Nothing is escaping the fallout as `recession fears' have now become the reasoning for liquidation,'' Alex Heath, the London-based head of industrial metals trading at RBC Capital Markets, said today in a report. ``On the back of this scenario, it remains of little surprise that the base metals have continued to sink.''

On the London Metal Exchange, copper for delivery in three months rose $250, or 6.6 percent, to $4,020 a metric ton ($1.83 a pound).

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.