London 03/08/2012 - Base metals gained on bargain hunting following yesterday's losses when ECB president Mario Draghi failed to back up his words with deeds.
"Pockets of bargain hunting have been seen," FastMarkets analyst James Moore said.
Attention is now on US employment data, with non-farm payrolls due for release at 13:30 BST. The forecast is for 101,000 new jobs to have been created in July, up from 80,000 in June.
"Again we expect a subdued start to the metals ahead of the US employment figure as players attempt to gauge the likelihood of QE3 (a third round of quantitative easing) at Septembers FMOC meeting," Moore added, "A weak jobs reading has the potential to lead the metals back towards the top end of their recent ranges; however a strong reading would reduce the likelihood of further stimulus measures and could trigger a break-down from recent ranges."
Yesterday, the metals were sharply lower, precipitated by the European Central Bank's decision not to immediatly intervene to further stimulate the zone's faltering economy.
Last week, Draghi raised hopes of large-scale intervention in the markets, when he told a meeting in London he would do whatever it takes to save the euro. But when the ECB met on Thursday, it decided to keep interest rates unchanged and it did not announce further monetary intervention.
Draghi said, however, that the ECB would devise a plan to combat exceptionally high risk permia for some eurozone countries.
In keeping with his ramped-up rhetoric of late, he said: "The euro is irreversible, it stays. It is pointless to bet against the euro. It is pointless to go short on the euro."
But markets were unimpressed and bond yields quickly shot up, with Spanish 10-year bonds last yielding 7.26 percent and that Italian 10-year climbing to 6.4 percent.
"Turns out super Mario is not so super," FastMarkets analysts Jono Remington-Hobbs said. "What did he give us this meeting? No negative deposit rate, no non-sterilisation of bond buying, no banking license for the EFSF, just the potential for SMF purchases of certain debt to restrain rising yields - which we consider a measure to buy time.
"In short the markets were looking for a bazooka but instead got a something more akin to a hand gun," he added.
In data released so far this morning, the Chinese non-manufacturing PMI came in at 55.6, while the Spanish and Italian services PMI registered 43.4 and 43.0 respectively. European services PMI came in at 47.9, up from 47.6. In Britain, services PMI was at 51, down from 51.3 and 30 basis points below the expected number. European retail sales came in on expectations at 0.1 percent.
BASE METALS UNIFORMLY HIGHER, WAREHOUSE STOCKS LOWER
Copper climbed to $7,343 per tonne, up $13 with 8,355 lots traded on Select so far. Warehouse stocks dipped by 2,075 tonnes, taking the total to 244,725 tonnes. The biggest decrease was in Busan, were 800 tonnes flowed out. Net outflows were also seen in New Orleans, Baltimore, Chigaco and St Louise. Cancelled warrants, at 46,800 tonnes are 1,800 tonnes higher.
Aluminium, last at $1,847.50 per tonne - up $7.50, with 4,162 lots traded - saw inventories decreased by 6,450 tonnes to 4,864,450 tonnes. The largest outflows occurred in Vlissingen and Detroit, where 3,000 and 2,850 tonnes left the warehouses respectively. Rotterdam stocks increased by 2,450 tonnes. Cancelled warrants, at 1,696,300 tonnes is 19,800 tonnes lower.
Lead stocks dipped by 1,750 tonnes to 327,100 tonnes, with Bilbao seeing 1,200 tonnes flowing out of warehouses and smaller amounts leaving Barcelona and Long Beach. Cancelled warrants decreased by 1,875 tonnes to 42,250 tonnes. The metal was last trading at $1,865.75 per tonne, $11.75 firmer.
In other metals, tin strengthened $275 - or more than one-and-a-half percent - to $17,700 per tonne, inventories were down 75 at 11,650; nickel was up $165 - more than one percent - to $15,415, with stocks falling 264 tonnes to 115,314; zinc climbed $7 to $1,819 with reserves at 992,300 down 2,375.
Steel billet was indicated at $381/410, while cobalt was lower at $27,000/29,950 per tonne and molybdenum was neglected.
In currencies, the euro was last at 1.2215 against the dollar, up 0.0038, with the dollar index at 83.11, 0.22 lower. Brent crude oil was last at $106.79/106.81 per barrel, up nearly one percent.
(Editing by XX)