By: Kathleen Retourne

London 26/10/2012 - Base metals were back in negative territory on Friday morning, returning to September lows under pressure from souring sentiment after yesterday’s brief rally petered out.

“Yesterday’s recovery rally on the metal markets proved to be a brief one,” Commerzbank said. “A reversal already began yesterday evening after disappointing corporate reports hit the equity markets."

"Attention will no doubt be focusing today on the US third-quarter GDP figures," it added. "If there is surprise good news on growth in the country, which is the world’s second-largest consumer of metals, prices could rise.”

Spain was back in focus - the country is slipping deeper into recession. Spanish unemployment rose to a record 25 percent in the third quarter - almost 5.8 million are now out of work - from 24.6 percent in the second.

The news pushed the yield on Spanish 10-year bonds to its highest for eight weeks at 5.66 percent. The market is becoming increasingly concerned that Spain has yet to ask for a bailout from Brussels.

In other markets, the dollar rose to a two-week high of 1.2914 against the euro at one stage, while European equities fell away

During Asian trading, the Shanghai Composite Index dropped to a four-week low. Additionally, while Japan announced that it would provide 750 billion yen ($9.4 billion) to stimulate its economy, it was regarded by some as too little, too late.  

This afternoon, market attention today will switch to the US third-quarter GDP release, where growth of 1.9 percent is expected.


METALS AT FRESH LOWS

Copper was down $38 on the previous day at $7,777 per tonne, trading back at seven-week lows. The Nov/Dec forward spread continues to show tightness at $3.00/5.00 back. Inventories rose a net 1,100 tonnes to 219,800 tonnes due to increases in Gwangyang and Busan. Cancelled wants at 42,000 tonnes were down 1,475 tonnes.

Aluminium at $1,921 is at a session low and around seven-week lows, down $17 on Thursday's close. Despite a 1,000-tonne increase in stocks at Antwerp, total stocks were down 6,000 tonnes at 5,052,625 tonnes. Still, cancelled warrants stepped 9,400 tonnes lower to 1,737,275 tonnes.

Lead hit a seven-week low, dropping below $2,000 to $1,979 - its weakest since September 3 - before settling at $1,990, still down $15. Tightness is edging back into the spreads, with Nov/Dec showing a backwardation of $7.50.

In stocks, Antwerp inventories rose 2,075 tonnes to 91,125 tonnes, while total stocks were up 450 tonnes to 310,325 tonnes. Cancelled warrants slipped 1,475 tonnes to 106,825 tonnes.

Zinc was last at $1.826.75, a $9.75 loss, after earlier slumping to an eight-week low of $1,822.25. Stocks fell 3,025 tonnes to 1,142,900 tonnes due to drawdowns in New Orleans and cancelled warrants at 364,300 tonnes declined 3,125 tonnes.

Nickel at $15,980 was down $220 - the metal had also dropped to an eight-week low at $15,905 earlier this morning. Stocks rose 294 tonnes to 129,012 tonnes and cancelled warrants were up 700 tonnes at 11,622 tonnes.

Tin fell below $20,000 to bottom out at $19,902, its weakest since September 7. Last business at $19,985 was still down $415 or more than two percent. Stocks at 11,750 tonnes were up just 10 tonnes and cancelled warrants rose 50 tonnes to 4,410 tonnes.

Steel was quoted at a stronger $350/370, with stocks slipping to 111,085 tonnes - the Antwerp total dropped 845 tonnes to 89,050 tonnes. In the minor metals, cobalt was offered at $26,500 and molybdenum at $25,000.


(Additional reporting by Martin Hayes, editing by Mark Shaw)