By: Eddie van der Walt

London 01/10/2012 - Base metals were mostly lower on Monday morning, with only copper and nickel bucking the trend in light trade - Chinese markets are closed for a one-week holiday.

“We see prices being influenced by the tug-of-war between the bearish fundamentals and the bullish QE and stimulus measures," FastMarkets analyst William Adams said.

The complex lost ground on weak Chinese PMI data released earlier but regained some ground after PMIs from Europe came in better than forecast.

China’s September manufacturing PMI at 49.2 was up from 49.8 last time but was its second consecutive reading below the 50 mark that indicates contraction.

"The official PMI figures suggest that People’s Bank of China's reverse repo operations have not worked as intended," ANZ said. "We believe it is time to switch to a reserve requirement ratio cut and use the reverse repo to manage and reduce interest rate volatility."

European manufacturing PMIs showed contraction across the continent last month although it has eased - Spain’s reading of 44.5 was up from 44.0 last time, Italy was up 2.1 at 45.7 and the UK was down 1.1 at 48.4, with the Europe-wide figure at 46.1, up 0.1.

Europe's unemployment rate for August came in unchanged at 11.4 percent, with that of Italy at 10.7 percent.

Later today, two manufacturing PMI readings and data on construction spending are due from the US. On Thursday, Europe will again be in the spotlight when the governing council of the European Central Bank meets. It is expected to keep rates stable.

There are also meetings of the Reserve Bank of Australia, the Bank of England and the Bank of Japan, followed on Friday by the release of the closely watched US non-farm payroll numbers.

"This time, the release will be watched even more closely than usual as the Fed has made its quantitative easing program dependent on labour market developments," Credit Suisse said in a note, "The data can thus provide guidance on how much easing one can expect."

In company news, Xstrata's board of directors has approved the Glencore/Xstrata merger but Glencore has been forced to make management concessions.

In wider markets, the dollar was down - the USDX was 0.05 lower at 79.80 and the euro was almost a fifth of a cent higher at 1.2884. Brent crude oil is down 15 cents at $112.08 per barrel and spot gold slipped $1 to $1,770.90 per ounce in London.

In equities, the Nikkei is down 74 points at 8,796 but in Europe the DAX is up 77 points at 7,294 and the FTSE 100 up 50 points at 5,792.


METALS MIXED IN QUIET TRADING CONDITIONS

Three-month copper was last $20 higher than Friday's close at $8,225 per tonne, with about 3,325 lots traded on Select as of 10:19 BST. Stocks rose a net 4,100 tonnes to 223,500 tonnes, with Busan adding 4,600 tonnes. Cancelled warrants are 1,575 tonnes lower at 39,250 tonnes.

Aluminium, which had traded as low as $2,078.75 following the release of the soft Chinese data, recovered to $2,093.75 but was still down $18.25. Stocks fell 6,075 tonnes, the sixth consecutive fall, to 5,049,775 tonnes. Detroit released 3,050 tonnes and Vlissingen 3,000 tonnes. Cancelled warrants are 9,075 tonnes lower at 1,585,025 tonnes.

"We still find it hard to be bullish [for aluminium] and see risks that the price could ease back," ANZ said.

Lead was last at $2,251.25, down $28.75. Stocks dropped for the 17th consecutive time, down 2,625 tonnes at 265,075 tonnes. Singapore saw an outflow of 1,500 tonnes, while Port Klang, Malaysia, released 1,250 tonnes. Cancelled warrants are 3,250 tonnes lower at 79,450 tonnes.

Zinc was last down $28 at $2,068. Stocks fell 1,875 tonnes to 989,500 tonnes, with 1,450 tonnes leaving New Orleans. Cancelled warrants slipped 750 tonnes to 357,875 tonnes.

Nickel is up $26 at $18,501 although stocks climbed 1,494 tonnes to 124,074 tonnes and cancelled warrants fell 108 tonnes to 16,968 tonnes.

Tin is down $80 at $21,720. Stocks are unchanged at 12,255 tonnes, with cancelled warrants 20 tonnes lower at 6,345 tonnes.

Steel billet at $330/368 was soft, with stocks up 3,510 tonnes at 53,365 tonnes. In minor metals, molybdenum is quoted at $24,000/25,500, while cobalt was neglected. Stocks of both were unchanged.


(Editing by Mark Shaw)