Copper May Rise on Dollar Slide; Lead Gains to Four-Month High

(Bloomberg) -- Copper may advance in London on speculation declines in the dollar will accelerate investor demand for the metal used in plumbing and power plants.

The U.S. currency reversed gains and fell against the euro and declined for a sixth day against the yen. Copper has climbed 29 percent this year as an index of the dollar against six currencies including the euro and the pound has dropped 4.1 percent.

``The dollar is helping to support commodity prices,'' said Leon Westgate, a metals analyst at Standard Bank Ltd. in London. ``The main driver is money flow.''

Copper for delivery in three months gained $10 to $8,585 a metric ton as of 12:48 p.m. on the London Metal Exchange. Prices yesterday rose to $8,661, the highest since May 2006 when copper gained to a record $8,880 a ton.

The higher prices have curbed demand in China, the world's biggest user, said Eric Yan, head of China trade at Triland Metals Ltd. in London.

``If copper goes up to $10,000, Chinese demand will be dramatically reduced,'' he said. ``Chinese demand is quite weak and I don't think it will recover very soon.''

Nickel rose $400 to $33,600 a ton. Prices have climbed 15 percent since a strike began Feb. 28 at a Colombian mine owned by BHP Billiton Ltd. The workers are still on strike, Illtud Harri, a spokesman for BHP in London, said in an e-mail today.

Global nickel inventories in warehouses monitored by the London Metal Exchange dropped 120 tons to 47,592 tons, the exchange said today in its daily warehouse report. Supplies are little changed this year.

 

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Staples Net Income Falls 1% on Lower Retail Sales

(Bloomberg) -- Staples Inc., the world's largest office-supplies retailer, said fourth-quarter profit fell 1 percent on lower North American retail sales to small companies and consumers.

Staples dropped in Nasdaq Stock Market trading.

Net income declined to $333.2 million, or 47 cents a share, from $336.5 million, or 46 cents, a year earlier, Staples said today in a statement. Profit met some analysts' estimates. Revenue for the three months ended Feb. 2 rose less than 1 percent to $5.32 billion. Staples cut its full-year forecast.

Sales at U.S. and Canadian stores open at least a year dropped 6 percent. Office-supply retailers' sales slowed as customers concerned about a declining job market and the worst housing slump in a quarter century reduced purchases of copiers and desks. North American sales have also declined at smaller competitors such as Office Depot Inc.

``The environment is hitting everyone pretty hard,'' Walter Todd, who helps manage $800 million for Greenwood Capital Associates LLC in Greenwood, South Carolina, said yesterday in an interview. ``It's all macro-driven.'' The firm held 175,048 Staples shares as of Dec. 31.

The retailer predicted a ``mid single-digit'' percentage increase in sales and ``high single-digit'' percentage growth in earnings per share for the year ending next Jan. 31. Staples said in November that it expects earnings per share this year to increase by a percentage in the ``low teens,'' with ``high single-digit'' sales growth.

Staples Stock

Staples, based in Framingham, Massachusetts, fell 54 cents, or 2.4 percent, to $21.95 at 9:44 a.m. in Nasdaq Stock Market composite trading. The stock lost 2.5 percent of its value this year through yesterday, compared with a 20 percent decline for Office Depot, the second-largest office-supplies retailer.

``In the context of a tough retail environment, we view Staples as relatively stable,'' Jack Murphy, an analyst at William Blair & Co. in Chicago, wrote yesterday in a research note. He rates Staples shares a ``buy.''

Analysts estimated fourth-quarter profit of 47 cents a share, the average projection of 16 analysts surveyed by Bloomberg. Eleven analysts, on average, estimated sales of $5.4 billion.

In November, Staples forecast a ``low double-digit'' sales growth in the fourth quarter, with North American same-store sales unchanged or ``slightly negative.''

 

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Dollar Falls Against Yen on Bets Fed Will Lower Rate 0.75-Point

(Bloomberg) -- The dollar fell for a sixth straight day against the yen and traded near a record low versus the euro as traders increased bets that the Federal Reserve will lower interest rates by 0.75 percentage point this month.

The U.S. Dollar Index, which compares the currency with those of six trading partners, dropped as futures showed a 74 percent likelihood the Fed will reduce rates to 2.25 percent. Last week, traders saw no chance of a cut that steep. Canada's currency fell after the Bank of Canada cut rates today to help offset a slump in exports to the U.S.

``The dollar will remain under pressure,'' said Omer Esiner, an analyst at currency-trading company Ruesch International Inc. in Washington. ``The U.S. economy is looking weak.''

The dollar fell to 103.08 yen at 9:10 a.m. in New York, from 103.49 yen yesterday, when it fell to 102.62 yen, the lowest since Jan. 28, 2005. The U.S. currency traded at $1.5202 per euro, from $1.5204 yesterday, when it touched $1.5275, the weakest level since the European currency's 1999 debut.

``Don't fight the dollar weakness,'' a team of strategists at Zurich-based UBS AG, led by Mansoor Mohi-uddin, wrote in a research report published today. This week's U.S. data ``will likely increasingly suggest a recession,'' they wrote.

The U.S. Dollar Index traded on ICE Futures in New York was at 73.584 after declining to a record low of 73.354 yesterday. The slump in the U.S. currency helped push the price of oil to a record of $103.95 yesterday and gold to an all-time high of $989.54 an ounce.

`Grossly Misaligned'

The yen advanced to 156.71 per euro from 157.35.

UBS Wealth Management Research, a unit of UBS, wrote in a separate report that the world's foreign-exchange markets are ``grossly misaligned'' and Asian currencies may ``appreciate sharply.''

The Singapore dollar reached S$1.3897 against the U.S. currency, a decade-high, before trading at S$1.3904, from S$1.3910 yesterday. The Taiwan dollar advanced 0.6 percent to NT$30.922 per dollar.

The Australian dollar, also known as the Aussie, fell as the central bank governor said there is evidence consumer spending is moderating. The central bank raised the main rate to 7.25 percent today, the highest in 12 years. The Aussie was at 93.29 U.S. cents, from 93.96 cents yesterday and 94.98 on Feb. 28, the highest since March 1984.

``The Australian dollar is likely to be sold hard in the near-term,'' Hans-Guenter Redeker, head of currency strategy in London at BNP Paribas SA, one of the world's 10 biggest currency traders, wrote in a note to clients. A support level at 92.75 cents per dollar ``looks set to be broken,'' he said.

Canadian Rates

The Canadian dollar fell to 99.36 Canadian cents per U.S. dollar, from 99 cents yesterday, after the central bank cut Canada's benchmark rate by a half-point to 3.5 percent and said further ``stimulus'' will likely be required.

Japan's currency also climbed 1.3 percent to 95.97 against the Aussie and 1 percent to 82.68 per New Zealand dollar as widening credit-market losses prompted investors to reduce so- called carry trades

Japan's benchmark rate of 0.5 percent, the lowest among industrialized nations, compares with 8.25 percent in New Zealand and 4 percent in Europe. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the difference between the two. The risk is that currency moves erase those profits.

 

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