copper has become the favorite commodities trade, a sign that investors believe economic-growth prospects are improving from china to the u.s. prices for copper have closed higher 14 days in a row, the metal<u+2019>s longest winning streak on record for at least 28 years. that run lifted copper<u+2019>s price by 22% to a 52-week high, after the front-month contract rose 3.7% thursday to $2.5495 a pound. other base metals also have soared recently. top performer zinc has risen more than 50% this year, and aluminum, lead and nickel all hit new 52-week highs this week. the prices for industrial metals, the building blocks for infrastructure and other major construction, tend to move along with signs of rising or falling economic growth. copper in particular is considered a gauge of economic health, with its applications in everything from air conditioners and electric wiring to iphones. china has been responsible for much of the rally, analysts say. the government<u+2019>s new plan calls for additional spending on building and construction projects, and an official gauge of factory activity in china rose last month to its highest level in two years. the u.s. also posted signs of increased manufacturing activity in october. metals got another boost this week by the victory of donald trump, who has indicated plans to spend hundreds of billions of dollars on infrastructure. in his victory speech, the u.s. president-elect re-emphasized his plan for widespread construction. <u+201c>we are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,<u+201d> he said on wednesday. fiona boal, director at fulcrum asset management in london, said mr. trump<u+2019>s election as president is adding one more bullish factor to copper, <u+201c>the trade du jour.<u+201d> the metal<u+2019>s rally has carried over to the shares of metal miners and producers. u.s. steel jumped 17% on wednesday following the election result. the steel producer and major u.s. copper producer freeport-mcmoran are both up six sessions in a row, gaining more than 27% and 23% for the month, respectively. still, the recent surge in metal prices has some investors concerned that the rally has been overdone. <u+201c>we are cognizant that a good deal of market expectation is already baked into the price,<u+201d> said peter kocubinski, manager of the commodity investment team at j.p. morgan asset management. others have doubts about the longer-term impact of mr. trump<u+2019>s presidency on base metals. analysts said that a rise in protectionism could hurt markets for steel and aluminum. some note that an increase in u.s. infrastructure spending would be dwarfed by potential demand from china, and would take some time to affect metal prices. goldman sachs group inc. metals analysts also sounded a cautious note in a thursday research report. the report said that other metals such as steel should benefit more from infrastructure spending than copper, which is more closely tied to housing activity. but nicholas johnson, who helps manage $15 billion in commodities investments at pacific investment management co., says interest in copper and metals could get a boost from rising inflation expectations. mr. trump<u+2019>s pledge for more infrastructure spending, along with his proposed tax cuts, could help lift economic growth, push bond yields higher and lead to some inflation. <u+201c>it<u+2019>s reasonable for there to be some commodity buying on the back of that,<u+201d> mr. johnson said. another reason copper and metals are getting so much attention: oil prices, which usually trades alongside metals, have been falling. supply concerns, and skepticism that the oil-producing nations can reach an agreement to limit production, have knocked down crude prices in recent weeks. the correlation between oil and copper fell to its lowest level in 13 years on monday, making the base metal the favored way to play commodities. on the london metal exchange, long positions on copper have reached the highest since february 2011, brokerage marex spectron noted this week. meanwhile, investors have also been cutting back oil exposure, reducing a net-long position by 12.7% to 234,126 contracts for the week ended nov. 1, according to the commodity futures trading commission. darwei kung, portfolio manager of the $2.1 billion deutsche enhanced commodity strategy fund, said he expects further outperformance for industrial metals. <u+201c>the first go-around was more short-covering trades,<u+201d> he said. <u+201c>i think we might be moving beyond that right now. this is more upside view on copper.<u+201d> <u+2014>katherine dunn contributed to this article. write to stephanie yang at stephanie.yang@wsj.com
china and trump make copper a red-hot bet - wsj
stephanie yang