Copper Rises as Stocks Gain After Rate Cuts; Nickel, Tin Down

By Li Xiaowei

Oct. 9 (Bloomberg) -- Copper climbed from the lowest in 2 1/2 years as Asian shares rose after central banks around the world cut interest rates, improving demand expectations for industrial metals. Nickel and tin fell.

Stocks in Asia snapped a five-day plunge, gaining as much as 2.8 percent. The Federal Reserve, European Central Bank and four other central banks lowered interest rates yesterday in a coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression. China also reduced its interest rate within minutes of their cuts. Hong Kong, South Korea and Taiwan followed suit.

``The cuts could be a double-edged sword, either helping confidence to recover or underlining how serious the credit crisis is,'' said Li Ye, an analyst at Minmetals StarFutures Co., by phone from Shenzhen today. ``Fundamentally it may take a year for metals markets to improve. Yet a technical rebound is possible given the remorseless plunge recently.''

Copper for three-month delivery rose as much as 1.4 percent to $5,315 a metric ton on the London Metal Exchange and traded at $5,280 at 12:24 p.m. in Shanghai. The contract dropped as much as 7.4 percent to $5,212 a ton yesterday, the lowest since March 2006, and closed 6.9 percent down.

China cut both lending and deposit rates, reduced the proportion of deposits banks must set aside as reserves, and temporarily eliminated individuals' taxes on interest earnings from savings accounts.

Rate Cuts


These actions ``are a lot stronger than market expectations and show that the Chinese government has firmly adopted a pro- growth policy,'' Na Liu, an analyst with Scotia Capital, a unit of Toronto-based Bank of Nova Scotia, wrote in an e-mailed report today. ``The news is a significantly positive development for the global raw materials and energy sectors.''

Nickel tumbled for a sixth day, reaching the lowest since November 2005. The three-month contract fell by as much as 4.2 percent, to $12,650 a ton, and traded at that level at 12:19 p.m. in Shanghai.

The global nickel surplus may widen to 110,000 metric tons in 2009 from an estimated 30,000 tons this year as usage by stainless steel makers is slow to recover, the International Nickel Study Group said. Posco, Asia's largest maker of stainless steel, may produce less of the rust-proof metal this year than planned because of slower demand, the company said.

Shanghai Markets

Trading of most Shanghai copper contracts - those for deliveries ranging Oct. 2008 to July 2009 - were suspended for one day today on the Shanghai exchange after they plunged the daily limit for three straight days.

Zinc fell by the exchange-imposed daily limit in Shanghai, dropping 4 percent from the previous settlement price, to 12,285 yuan ($1,799) a ton and traded at that level at midday.

Among LME-traded metals, aluminum was 0.7 percent up at $2,270 a ton, zinc rose 4.5 percent to $1,494, lead added 1.6 percent to $1,600 and tin was 2.7 percent lower at $14,500.

To contact the reporter for this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net