Copper Rallies on Equities Gain, Speculation Declines Excessive

By Glenys Sim

Oct. 28 (Bloomberg) -- Copper rebounded above $4,000 a metric ton on speculation recent losses were overdone and as Asian stocks rallied for the first time in five days.

The metal's 14-day relative strength index, used by some traders and investors to gauge changes in price direction, showed declines have been excessive. The index has stayed below 30 since Oct. 20, a reading that signals prices may rise. The MSCI Asia Pacific Index advanced 3.5 percent at 3:40 p.m. in Singapore.

``The rebound in stock markets lends some positive sentiment to other asset classes, but that's not to say we're going up from here,'' Liang Lijuan, chief analyst at Yide Futures Brokerage Co., said today.

Copper for delivery in three months traded at $4,060 a ton at 3:32 p.m. in Singapore, after falling as much as 4.9 percent to $3,825 earlier. Copper is down 55 percent from its record $8,940 in July, and has declined 41 percent for the year.

Copper for January delivery on the Shanghai Futures Exchange dropped by as much as the limit of 5 percent, from the previous settlement price, to 30,910 yuan ($4,518) a ton, the lowest for a most-active contract since June 2005. It settled at 31,660 yuan.

``We're not at the bottom yet,'' Li Jingyuan, an analyst at Haifu Futures Co. said today from Shanghai. ``Chinese buyers are very sensitive to price fluctuations so we won't see them emerge until after they determine the price is low enough.''

Chinalco Luoyang Copper Co., the biggest processor of the metal for parent Aluminum Corp. of China, said orders fell 20 percent last quarter as the economy grew at the slowest pace in five years.

Copper Production

The decline represented a drop in monthly production to 7,000 tons in the third quarter, from 9,000 tons to 9,500 tons in the first half, said an executive who declined to be identified because he's not the official spokesman.

The MSCI Asia Pacific Index rebounded after earlier falling 2.8 percent. The measure slumped 19 percent in the previous four days, closing yesterday at the lowest since August 2003.

Copper is down 36 percent this month as the worsening credit crisis weighed on stock markets and the dollar rallied 11 percent against the euro. The currency slipped to $1.2515 versus the euro at 3:47 p.m. in Singapore from $1.2493 late yesterday.

``All eyes will be on the U.S. Fed from tomorrow as they decide on the next interest rate cut in the U.S.,'' Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote in an e- mail today. ``This could provide some support to the markets.''

The Fed's Open Market Committee will probably reduce the benchmark federal funds rate by half a point next week to 1 percent, the lowest since May 2004, according to a Bloomberg survey of 64 economists.

Among other LME-traded metals, aluminum rose 0.8 percent to $2,055 a ton, zinc declined 1.3 percent to $1,170, and nickel added 3.6 percent to $11,500. Lead gained 2.5 percent to $1,327, and tin added 5.5 percent to $14,300 as of 3:49 p.m. in Singapore.

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