Base metals fall on housing outlooks

Base metals fall on housing outlooks

	Published : Tue, 10 Jul 2007 22:15 By : Agencies Print this Story

NEW YORK (AP) - The industrial metals market slumped Tuesday under the weight of disappointing outlooks from major players in the U.S. housing sector -- a potential warning sign that demand for metals could wane.

Elsewhere in commodities, agriculture and energy futures rallied higher.

Home Depot Inc., the world's largest home improvement store chain, on Tuesday lowered its 2007 guidance sharply, raising traders' concerns that the U.S. housing market will remain sluggish this year. Homebuilder D.R. Horton Inc. forecast an operating loss for its latest quarter as inventories of unsold homes continue to build. The outlooks jogged fears that a rebound in the housing industry isn't near.

'Clearly it's causing some jitters,' said UBS base metals strategist Robin Bhar. 'Even though copper is supported by its supply-demand fundamentals, it can't ignore some of the macroeconomic concerns.'

Copper dipped despite dwindling inventories, while steel-coating metals nickel and zinc posted the sharpest drop on the London Metal Exchange.

Nickel's 5 percent drop helped drag down the rest of the industrial metals complex. The metal tumbled to a six-month low as inventories of the metal keep swelling in the face of competition from a a cheaper, Chinese-made substitute.

Nickel -- used in airplane jet engines, power plant turbines and other industrial applications -- had a spectacular run-up in 2006 as development in China and elsewhere stoked demand, and prices tripled. But high prices for refined nickel led Chinese stainless steel mills to shift to nickel pig iron, a cheaper alternative.

In New York, copper futures fell 1.95 cents to close at $3.61 a pound on the Nymex.

Meanwhile, the weaker-than-expected earnings forecasts from Home Depot, D.R. Horton and others pressured the U.S. dollar and helped hoist the euro to an all-time high about $1.37. That boosted gold prices.

Gold -- which often moves inverse to the dollar as investors seek a safer haven -- added $1.90 an ounce to settle at $664.40 on the Nymex, and silver rallied with a 15.5-cent gain to end at $12.975 an ounce.

Higher energy prices also supported gold. Light, sweet crude for August delivery tacked on 62 cents a barrel to settle at $72.81 amid reports of refinery glitches and, as a result, increasing prices for refined products. Gasoline futures rose 2.48 cents to end at $2.3694 a gallon, while natural gas and heating oil prices also climbed.

'Refinery problems continue to weigh on the market,' said Yasser Elguindi, senior managing director at Medley Global Advisors.

In Chicago, soybean prices turned sharply north after the Chicago Board of Trade's November contract broke through $9.03 a bushel -- a key price level that helped trigger additional investment and sent prices up to as high as $9.22, said DTN analyst Darin Newsom. Many investment funds operate on the assumption that once a commodity hits a certain price level, the market will stretch the run higher.

A sharp drop in U.S. soybean acreage this year has left the market nervous about supply. Analysts have said higher market prices for soybeans are need to spur Brazil and Argentina to plant a larger crop and make up for the decrease in soybean acreage here.

Also providing some lift to prices, the U.S. Department of Agriculture reported late Monday that the condition of the nation's corn, soybean and wheat crops had weakened slightly from the previous week.

November soybeans surged 18.4 cents to settle at $9.204 a bushel, while wheat gained 2.2 cents to close at $6.016 a bushel. December corn picked up 6.6 cents to close at $3.57 a bushel.