21 Jan 2006 17:32
21.01.2005 17:10:31 NY copper jumps on inventory drop, technical buying
NEW YORK, Jan 21 (Reuters) - COMEX copper futures rose Friday morning, pulled higher by a rally in London where prices were driven up by a drop in global copper inventories, which then triggered automatic buy-stop orders placed by funds, traders said.
"It was very bullish in London overnight, we opened higher and triggered some light stops (loss buy orders) above $1.4265 and then again at $1.4305 (a lb. on March copper)," said one COMEX floor broker.
At the COMEX division of the New York Mercantile Exchange, benchmark March copper rose 2.00 cents to $1.4350 a lb, in a range between $1.4110 and $1.44. Spot January was up 2.20 cents at $1.48, and the rest gained from 1.80 to 2.20 cents.
COMEX estimated 1000 a.m. EST copper volume at 6,000 lots.
Most of the buying came from arbitrage buyers in London, who were inspired by Chinese interest overnight, which then set off funds stop loss buy orders in the COMEX market. But, then the buying stopped, brokers said.
"No one followed through. That was the big problem. The buying came, nobody came behind it. Now they're sitting, and now they're getting a little nervous," another broker said.
Brokers said locals got caught short the first time buy orders were triggered, but they sold into the second level.
"I think they're (locals) playing it from the short side right now," said one trader.
Tight Chinese stocks, which fell to less than 30,000 tonnes this week, encouraged buying in Europe that spilled over into the New York session where brisk buying in the arbitrage market transpired, traders said.
At Shanghai Futures Exchange warehouses, copper stocks fell to 29,347 tonnes in the week. With two weeks to go to the expiry of the February contract, traders there said some players are betting imports will not be high enough to deliver against open positions.
Others think there are sufficient copper stocks to meet demand before markets close for the Chinese New Year in mid-February.
London Metal Exchange copper warehouse stocks fell by 150 tonnes to 43,475 tonnes on Friday. On Thursday, COMEX copper inventories were down 166 short tons at 47,981 tons.
After the New York open, copper added to gains after the preliminary reading of the University of Michgan's consumer sentiment survey came in lower than forecast at 95.8 in January than 97.1 last month.
The dollar fell against the euro after the sentiment data, which renewed speculative buying on the COMEX.
Traders said short-term traders on COMEX and in London have been keying off of fluctuations in the euro, but large hedge funds were more likely to buy copper based on suggestions of strong demand fundamentals.
Dollar losses tend to improve purchases of dollar-denominated assets, like copper, by overseas buyers.
LME copper for three-months delivery shot up to $3,078 a tonne from Thursday's close at $3,040.