LME MORNING - Base metals consolidate, look for direction

By: Kathleen Retourne

London 02/10/2013 - Base metals were mixed on in Wednesday morning LME trading, with copper and aluminium posting marginal gains but the rest remained in negative territory.

“In line with the commodities markets overall, metal prices are also under pressure, and are still proving weak vis-à-vis equities," Commerzbank said in a note. "Nor has the weaker dollar had any positive impact on prices. As the Chinese markets have been closed since yesterday for the Golden Week holiday, there is no support from this quarter either."

On Tuesday, base metals sold off after weaker-than-expected Chinese numbers unsettled investors. The mood soured further once US markets opened given the budget impasse in Washington that triggered a government shutdown.

The partial shutdown of the US government - the first in 17 years - after politicians from both sides of the political divide failed to agree a spending bill before Monday’s deadline has weighed on the dollar, which was last down a tenth of a cent against the euro at 1.3534, close to intraday lows and not far from its recent eight-month nadir.

“One of the side effects of the shutdown is that the US government has announced that during the shutdown period it would not release key economic data, including the monthly jobs reports,” Credit Suisse said.

The US Bureau of Labor Statistics will not collect data and issue reports. It remains uncertain if the September non-farm payrolls data will be released in full as scheduled on Friday.

In Europe, meanwhile, Silvio Berlusconi plunged Italy into crisis last week by withdrawing his party from the ruling coalition but he may make an astonishing U-turn and support Prime Minister Enrico Letta in today’s vote of confidence.

Today’s data calendar is fairly light - earlier, the Spanish unemployment change at 25,600 was considerably higher than the forecast 12,300. Later, the EU minimum bid rate scheduled, while the European Central Bank (ECB) will hold a press conference at 13:30 BST.

In the metals, copper at $7,205 per tonne was up just $7 on the previous day’s close. Trading conditions remained thin, with just 4,900 lots changing hands on Select so far.

Stocks were down for the 19th consecutive day, falling a net 1,450 tonnes to 531,875 tonnes, still their lowest since mid-March. Cancelled warrants edged 300 tonnes higher to 267,000 tonnes.

Aluminium at $1,825 was down just $1 - stocks declined 2,175 tonnes to 5,372,375 tonnes and cancelled warrants at 1,884,600 tonnes were down 2,750 tonnes. Nickel declined $63 to $13,687 after inventories hit a fresh record high of 227,292 tonnes.

Lead slipped $5 to $2,060, with routine movements in stocks, and zinc was $6 lower at $1,871. After yesterday’s notable stock increase of more than 57,000 tonnes, inventories and cancelled warrants both fell 4,550 tonnes this morning to 1,019,475 tonnes and 583,325 tonnes respectively.

Tin at $22,779 was down $271 even after inventories fell 45 tonnes to 13,195 tonnes.

Steel, cobalt and molybdenum were neglected.  

(Editing by Mark Shaw)