By: Kathleen Retourne

London 21/08/2012 - Base metals recouped some of their losses on Tuesday morning, tracking a higher euro. Overall, however, the complex remains stuck in recent ranges while investors stick to the sidelines ahead of further economic developments.

The euro has hit a two-week high above 1.24 against the dollar on growing expectations that the European Central Bank will take a firmer hand on borrowing costs. The single currency is now at 1.2409, up more than half a cent.

A Der Spiegel article claimed that the ECB is considering setting limits for how far bailout country bond yields will be allowed to diverge from German Bunds, which could result in additional bond purchases down the road.

The ECB responded to the article by stating it is “misleading to report on decisions which have not yet been taken”.

Additionally, Luxembourg Prime Minister Jean-Claude Juncker headed to Greece to discuss the latter country's request for an extension to its fiscal adjustment programme.

On the data front, flash PMIs are the main risk, Credit Suisse said, warning that they could trigger further selling in cyclical commodity markets.

“Positioning data reflects increased caution as investors left their overall exposure to commodities almost unchanged in the week ending August 14,” it added. “Specifically, exposure to cyclical markets such as oil and copper was reduced.”

Hopes that China would unveil new easing measures over the weekend have proved to be unfounded and better-than-expected new homes data could mean the government feels less inclined to ease policy further.


CANCELLED WARRANTS UP

Aluminium is now at $1,848 per tonne, up $11 on the previous day’s close. Cancelled warrants saw a notable jump of a net 22,950 tonnes, with the Singapore total up 13,675 tonnes to 14,875 tonnes and Baltimore up 5,925 tonnes to 26,675 tonnes.

Total aluminium LME inventories were down 4,225 tonnes at 4,909,950 tonnes despite a 2,900-tonne increase in Rotterdam. Stocks in this location have been rising steadily since July 24 to stand at 532,325 tonnes, 7,325 tonnes of which are cancelled warrants.

Lead rose $4.75 to $1,913.75. Inventory moves are seen supporting the metal, which was the best performer yesterday, with cancelled warrants up 4,625 tonnes at 58,750 tonnes after a 5,000-tonne rise in Port Klang, Malaysia, and total stocks down 275 tonnes at 317,250 tonnes.

Copper at $7,534 was up $79 or more than one percent. Stocks were marginally higher at 234,500 tonnes, rising 350 tonnes, while cancelled warrants were down 325 tonnes at 37,450 tonnes.

Nickel at $15,602 was up $52 after inventories slipped 96 tonnes to 115,662 tonnes and cancelled warrants climbed 786 tonnes.

Zinc rose $19.25 to $1,815.25, stocks lost 2,075 tonnes to 973,726 tonnes and cancelled warrants at 127,725 tonnes were down 775 tonnes.

Tin rose to $18,800 from $18,505 at Thursday’s close, with stocks unchanged at 11,630 tonnes and cancelled warrants up 460 tonnes due to an increase in Johor.

Steel was quoted a little softer at $376/395 even after stocks dropped a further 260 tonnes to 54,600 tonnes and cancelled steel warrants jumped 12,740 tonnes after Antwerp booked 16,315 tonnes for removal.

In the minor metals, cobalt was indicated at $28,638/29,500 and molybdenum at $24,200/25,100.


(Editing by Mark Shaw)