Nickel leads base metals rally

Nickel, copper and zinc rose in London after the US Federal Reserve lowered interest rates to prevent an economic slowdown. Aluminium, lead and tin also gained.

The Fed yesterday trimmed its benchmark rate by half a percentage point, more than the forecast in a Bloomberg News survey of economists. The dollar traded within a cent of an all-time low against the euro. A weaker dollar makes dollar-denominated metals cheaper for those with other currencies.

The rally is attributable to "one part dollar weakness, one part a prospect of economic growth", said Sean Corrigan, chief investment strategist at Diapason Commodities Management, which has $6 billion under management in Lausanne, Switzerland.

The US is the third-largest user of nickel and the second- biggest of copper, zinc and aluminum. Investors were concerned that a US recession would halt a five-year rally in commodities that has meant record prices for metals such as copper.

Nickel for delivery in three months on the London Metal Exchange jumped as much as 5.4 per cent to $32,400 a tonne, its highest intraday price since July 24. It was $1,050 higher at $31,800 as of 11:22 a.m. local time.

Copper advanced $170 to $7,755, after trading at a seven- week high of $7,809. Lead rose $60 to $3,200 and aluminum added $28 to $2,435. Tin gained $140 to $15,150 and zinc was $108 higher at $2,948.

Mining stocks jumped. BHP Billiton, the largest mining company, gained as much as 7.1 per cent in London trading. Anglo American Plc jumped 7.3 per cent.

LME-traded metals are likely to see limited gains because of continued concern that banks' reluctance to lend may curb investment and metals demand, Corrigan said. Today's advance "is an immediate reaction; whether it would be economically sensible, it's too early to tell".

Stockpiles of nickel tracked by the LME dropped 0.7 per cent to 29,736 tonnes, the exchange said today. They have more than quadrupled this year. Copper stockpiles increased 0.5 per cent to 133,875 tonnes.