Copper Fluctuates After China Rate Rise Damps Further Tightening Concern

Copper in Shanghai fluctuated after China raised interest rates for the second time since mid- October, spurring expectations that the government may refrain from further tightening measures in the short term.

Copper for March delivery in Shanghai dropped as much as 0.9 percent to 68,310 yuan （$10,305） a ton, before closing little changed at 68,980 yuan for the midday break. Metal for March delivery on the Comex in New York gained 0.5 percent to $4.2800 a pound at 12:03 p.m. in Shanghai. The London Metal Exchange is closed today and tomorrow for public holidays.

“Following the two interest-rate hikes and three reserve requirement ratio hikes in the past two months, we may not see further tightening moves at least in the next couple of weeks,” said Zeng Chao, an analyst at Everbright Futures Co.

The People’s Bank of China yesterday raised interest rates for the second time since mid-October to counter rising inflation rates. The benchmark one-year lending rate increased by 25 basis points to 5.81 percent and the one-year deposit rate climbed by the same amount to 2.75 percent.

China’s inflation rate reached 5.1 percent in November, the highest in 28 months. The central bank has also increased commercial lenders’ required reserve ratio three times since November.

The Chinese government is confident of being able to control inflation and inflationary expectations, and property prices, Premier Wen Jiabao said in an interview with the China National Radio yesterday.

“The interest-rate increase was no surprise to the market, as it’s already a consensus that the central bank needs to mop up the liquidity,” Li Qiang, an analyst at Xinhu Futures Co., said by phone today.

Stocks Advance

China’s stocks rose for the first time in four days, led by financial companies and commodity producers, on speculation the interest-rate increase will curb inflation. The benchmark Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, climbed 0.7 percent to 2,854.91.

“The gains in the stock market may be taken as a positive sign by the commodities,” Everbright’s Zeng said.

Aluminum for March delivery in Shanghai was little changed at 16,720 yuan a ton, while zinc fell 0.7 percent to 18,730 yuan a ton.

--Helen Sun. Editor: Richard Dobson.