Copper traders diverge from hedge funds on recovery

Copper analysts are the most bullish in five weeks because of mounting optimism the global economy is strengthening, diverging from hedge funds holding their biggest wager on a retreat since August.

Thirteen analysts surveyed by Bloomberg expect prices to rise next week. Four forecast declines and three were neutral, for the highest proportion of bulls since Feb. 1. Goldman Sachs Group Inc. recommended March 1 buying the metal for a 16% gain in six months. Speculators are betting on a drop for the first time since November after inventories monitored by the London Metal Exchange advanced to a more-than two-year high.

Global equities rose to the highest since 2008 today on speculation central banks will continue stimulus to aid economies. China’s growth accelerated for the first time in two years in the fourth quarter and the Federal Reserve said March 6 the U.S. is expanding. While LME copper stockpiles doubled since September as supply outpaced demand, Barclays Plc forecasts a return to shortages in the next six months.

“With the U.S. improving and China coming out of its doldrums, we think copper is well supported,” said Carole Ferguson, an analyst at SP Angel Corporate Finance LLP, a broker and adviser in London. “Copper has been volatile because the stockpiles have been high. Outside the U.S. there’s still not great visibility. Europe is probably going to take a while to turn around.”

Copper Price

Copper fell 2.5% to $7,736 a metric ton on the London Metal Exchange this year, rebounding from a three-month low of $7,652 March 1. It’s still the second-best performer of the six main metals on the LME. The Standard & Poor’s GSCI gauge of 24 commodities lost 0.3% this year and the MSCI All- Country World Index of equities gained 5.8%. Treasuries declined 0.9%, a Bank of America Corp. index shows.

The U.S. economy grew at a modest to moderate pace across most of the country, the Fed said in its Beige Book business survey. Expansion will accelerate every quarter to 2.8% at the beginning of next year, while China’s growth will rise to 8.3% in the second and third quarters, from 7.9% at the end of 2012, economists surveyed by Bloomberg predict. China accounts for 42% of all copper usage and North America 11%, according to Barclays.

Central banks have pledged more action to spur growth as commodities rose about 2% since the end of 2010, compared with an 81% surge over the previous two years. Fed Chairman Ben S. Bernanke defended $85 billion in monthly purchases last week and the European Central Bank yesterday left interest rates at a record low. The International Monetary Fund predicts world economic growth will climb to 3.5% this year from 3.2% in 2012.

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