LME MORNING - Metals surge to fresh multi-week highs on fund and technical buying, triggered by strong euro

Thu, Jul 29 2010, 10:23 GMT
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London, 29 July 2010 - Base metals broke higher during Thursday morning LME trading, extending the current uptrend on fund buying as the euro jumped to 11-week highs against the dollar after positive German employment data and equity markets moved up.

Copper, aluminium, lead and zinc all bounded to fresh highs since May, while the latest daily warehouse inventory report held few surprises and did not derail the complex from its upward bias.

The euro was trading around 1.3075 against the dollar, having hit 1.3086, an 11-week high at one stage. After Asian shares rose to near three-month highs, European equities advanced 0.4 percent.

"Despite weak US economic data - the durable goods orders were worse than expected - metals could keep their relatively high price levels. The still-high risk appetite of market participants continues to support prices," broker Commerzbank said.

Over the last week, a run of mixed US data has highlighted the patchy nature of the economic recovery. On Wednesday, there was an unexpected drop in US June durable goods orders and a downbeat Federal Reserve view on the economy, the latest in a string of lacklustre indicators to suggest that the US economy is losing steam.

But the metals have become semi-detached at times over the last week from the data flow, reacting instead to upside technical momentum and fundamental stimulus.

"The disappointing durable good orders didn’t affect prices, meaning the current rally might be stronger than we think," LME RDM Triland Metals said.

Today, there are the usual weekly US jobless claimsm and tomorrow there is second quarter US GDP, setting the scene for the important monthly non-farm payrolls next week.

Growth in the second quarter was expected to slow to some 2.5 percent from 2.7 percent in the first quarter amid a cooling in consumer demand. However, broker Credit Suisse noted that a better-than-expected GDP report may set the scene for end-week gains.

"If the readings surprise to the upside as our economists deem possible, there is a potential for further strength of industrial metals," it said.

COPPER BREAKS CONVINCINGLY ABOVE $7,200

Copper managed to break significantly above the $7,200 per tonne level, hitting its highest since May 4, at $7,267, settling at $7,265, up $100 from the Wednesday close.

"It was inevitable it would have another go at $7,206 - that is the old high," a trader said.

"There's more fund money piling in for no real fundamental reasons - the tightness is Southeast Asia seems to have eased and enquiries have dropped as the Chinese arbitrage window closed," another trader said. "It looks like it could go even higher."

Today, there was a net 100-tonne increase in stocks to 411,525 tonnes but this was more than offset by a jump in cancelled warrants - metal booked for removal. These rose 8.8 percent to 35,650 tonnes, signalling more declines, which is the established pattern.

Elsewhere, aluminium jumped above $2,100 per tonne for the first time since May 14 on Thursday, hitting $2,109, then trading at $2,106, up $38. Stocks fell a net 4,500 tonnes to 4,390,625 tonnes.

Lead touched $2,042, its best since May 14, and subsequently traded at $2,039, up $21.50. There was a 475-tonne stock increase. Zinc hit its highest since May 17 at $2,002.75, then held at $1,996, a $41 gain.

Nickel was comparatively sluggish after another stock rise - the second in a row after 35 successive daily declines. Stocks climbed 444 tonnes to 116,778 tonnes. Business at $20,645 was up $240, but below recent two-month highs.

Tin traded at $19,600, up just $75, although the 105-tonne stock fall left inventories at 15,050 tonnes, the lowest since June 3, 2009.

Steel billet traded at $475, the highest since May 13, and a $10 advance. Cobalt was quoted at $39,600/42,000, up $2,600, while molybdenum was $32,400/33,900, against a previous $32,650/33,650.

(Additional reporting by Perrine Faye. Editing by Mark Shaw)

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