Copper Rebounds From Two-Week Drop in London as Stocks Rally

By Claudia Carpenter

Feb. 23 (Bloomberg) -- Copper rebounded from a two-week drop on the London Metal Exchange as shares rose on speculation that the U.S. government will increase its control of Citigroup Inc. Aluminum and nickel climbed.

The MSCI World Index of stocks added as much as 1.3 percent. The government may raise its holding in Citigroup as high as 40 percent, the Wall Street Journal reported today. Oil, soybeans and sugar also gained.

“Any Citigroup rescue would be positive for the financial sector,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “Metals will follow equities as sentiment improves.”

Copper for three-month delivery rose $86, or 2.7 percent, to $3,236 a metric ton at 11:33 a.m. on the LME. Prices dropped 11 percent in the past two weeks. Aluminum climbed $4, or 0.3 percent, to $1,309 a ton, paring an advance of as much as 1.6 percent. Nickel gained $125, or 1.3 percent, to $9,625 a ton.

Stockpiles of copper in LME-monitored warehouses fell to 544,650 tons, the second drop in four days. Inventories have climbed 60 percent this year. The metal has support based on analysis of technical charts because it has managed to stay above this year’s low of $3,025 a ton from Jan. 2, said Dhiren Sarin, an analyst at Barclays Capital in London.

“People are looking at opportunities all over,” Sarin said.

Metals Demand

Copper, used in plumbing and electrical wiring, dropped in the past two weeks on concern slumping global growth would slash demand for industrial metals. Some investors have blamed U.S. Treasury Secretary Timothy Geithner’s failure to clarify his intentions regarding Citigroup and Bank of America Corp. for hurting the companies’ shares.

Citigroup stock slid 44 percent last week, the biggest retreat in the Dow Jones Industrial Average, and Bank of America’s 32 percent slide was second-largest. Citigroup’s German-listed shares gained as much as 28 percent today.

The LME index of copper, zinc and four other industrial metals has lost 6 percent this year on speculation the slowing world economy will shrink demand. The Federal Reserve last week cut its forecast for the U.S. economy this year, with most officials seeing a contraction of 0.5 percent to 1.3 percent.

Hedge funds and other large speculators increased their bets on lower New York copper prices as of Feb. 17. Their net short position was 27,427 contracts, the most since at least 1993, figures from the U.S. Commodity Futures Trading Commission show.

Zinc for three-month delivery climbed $5 to $1,110 a ton, while tin dropped $25 to $10,500 a ton. Lead slipped $2 to $1,028 a ton.

To contact the reporters on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net