By Bloomberg News
June 4 (Bloomberg) -- Copper futures in Shanghai dropped for the first time in five sessions on speculation that the recent rally in prices may reduce demand and as a rising dollar eroded the appeal of commodities as an inflation hedge.
The U.S. Dollar Index, a six-currency measure, jumped 1.4 percent yesterday after touching 78.334 on June 2, the lowest level this year. Rio Tinto Group, the world’s third-biggest mining company, said copper may reverse recent gains in the next nine months as the recession creates an “uncertain” outlook.
“Base metals and energy commodities are trading rich relative to fundamentals” despite the “positive surprises to economic indicators” recently, said Tobias Merath, analyst at Credit Suisse, in a report today.
September-delivery copper on the Shanghai Futures Exchange fell as much as 3.8 percent today to 39,180 yuan ($5,736) a metric ton before trading 2.8 percent lower at 39,590 yuan at 10:07 a.m. local time. Before today, the contract had gained 9.5 percent this week.
On the London Metal Exchange, three-month copper was little changed at $4,918 after slumping 2.6 percent yesterday. The U.S. dollar index was little changed at 79.446. The dollar is poised to reverse declines because the outlook for inflation is being exaggerated, Banc of America-Merrill Lynch said in a report.
The metal also fell after a private report showed companies in the U.S. cut an estimated 532,000 workers from payrolls in May, signaling the labor market is still weak. Economists forecast the ADP Employer Services report would show a decline of 525,000 jobs, based on the median of 28 estimates in a Bloomberg News survey.
Among other LME metals for three-month delivery, aluminum fell 0.6 percent to $1,475 a ton, nickel slid 1.8 percent to $13,950 a ton and lead lost 0.6 percent to $1,600 a ton. Zinc added 0.7 percent to $1,545 a ton, and tin hadn’t traded by 10:05 a.m. in Shanghai
--Feiwen Rong, Richard Dobson. Editors: Richard Dobson, Wendy Pugh.
To contact Bloomberg News staff for this story: Feiwen Rong in Shanghai at +86-21-6104-7051 or frong2@bloomberg.net
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