Bloomberg Copper Jumps to Seven-Month High on Dollar, China Manufacturing

June 1 (Bloomberg) -- Copper rose to seven-month highs in London and New York as the dollar weakened and manufacturing increased in China, the biggest user of the metal.

China’s official Purchasing Managers’ Index was 53.1 in May, the third straight reading of more than 50, which indicates expansion, the Federation of Logistics and Purchasing said today in Beijing. The U.S. Dollar Index dropped as much as 1 percent to its lowest level this year, boosting the appeal of commodities as a hedge against inflation.

“People are really pouring into copper and the commodities overall right now on the dollar weakness and the thinking that there is an end in sight for the recession,” said Matthew Zeman, a trader at LaSalle Futures Group in Chicago. “A lot of these commodities can go a lot higher from here.”

“The Chinese data, on the surface, indicate the stimulus package, which includes fiscal and bank lending, has an effect in stimulating the economy,” said James Parsons, a portfolio manager at London-based BlueCrest Capital Ltd., which manages about $12 billion. “The question is, how sustainable that is.”

China Development

By the end of April, 20,000 kilometers (12,430 miles) of secondary roads, 445 kilometers of highways, 214,000 homes and 100,000 square meters (1.08 million square feet) of airport buildings had been built in China as part of a 4 trillion-yuan ($586 billion) economic-stimulus plan, the National Development and Reform Commission said on May 21.

Further dollar weakness and more signs of an economic recovery in China will buoy metals as traders and investors, who had speculated on a price decline, buy long positions to cover those wagers, Leon Westgate, an analyst at Standard Bank Plc in London, said today by telephone.

Hedge-fund managers and other large speculators reduced their net-short position, or bets on a price drop, by 5.8 percent in New York copper futures in the week ended May 26, according to U.S. Commodity Futures Trading Commission data. Speculators have been net-short in copper since July, the data show.

Among other metals traded in London, nickel added 4.7 percent to $14,595 a ton. Aluminum jumped 3.4 percent to $1,488.75 a ton. Tin increased 2.4 percent to $14,650 a ton and lead advanced 5.5 percent to $1,656 a ton. Zinc rose 2.2 percent to $1,602 a ton. more...