London 20/03/2013 - Base metals all gained ground on Wednesday morning after the Cypriot parliament rejected a levy on private bank deposits.
While this was a condition of a proposed 10-billion-euro bailout from the EU, leaving the country in need of an alternative solution to its economic crisis, it has eased fears that the same levy could be imposed elsewhere in the region.
“A bit of calm has returned to the market,” a senior trader said. “Chinese equities, stocks and the euro were better today and this has steadied metals.”
The single currency was back above 1.292 against the dollar - it was last at 1.2922, having slipped yesterday to a low of 1.2849.
“The fears of market players following yesterday’s rejection of the bailout package by the Cypriot government proved to be short-lived. The price losses suffered yesterday have been almost entirely recouped this morning,” Commerzbank said.
But one metals trader recommended selling into rallies because the underlying problem [in Cyprus' economy] hasn’t gone away and metals will be sensitive to news releases", he said.
“Even though the decision was rejected, the very fact that they considered it will make those with bank accounts nervous, and I wouldn’t be surprised to see a run on the banks when they open,” he said.
Although developments in Cyprus and its impact on risk appetite and the euro will continue to drive the direction of trading, fundamentals in the copper market have continued to deteriorate.
Japanese data released yesterday showed that copper wire and cable exports fell 6.2 percent in February to 55,700 tonnes from the same month of last year, which suggests that the government's efforts to stimulate the economy have yet to benefit the metals sector.
Meanwhile, market participants are looking ahead to the release of March flash manufacturing PMI data from the US, eurozone and China tomorrow for an update picture of the health of the global economy.
Today the US Federal Open Market Committee meets - market participants will keep a close eye on any developments that may provide clarity on the longevity of its third quantitative easing programme and on the health of the US economy. The FOMC statement will be published later today.
With most FOMC members committed to maintaining a highly accommodative monetary policy, the Fed should reaffirm its commitment to the current QE policy and to offer no hint that it will alter the policy in the near term, HSBC chief US economist Kevin Logan said.
COPPER CANCELLATIONS UP
Copper was back above $7,600 - it last traded at $7,606.75 per tonne, a $76.75 increase on the previous day’s close. On Select, volumes are robust, with around 9,500 lots changing hands by 10:45 GMT.
Copper stocks climbed for the 25th consecutive day, up 3,800 tonnes to 550,825 tonnes, the highest since March 2, 2010. Increases were seen in both Johor and New Orleans, up 2,900 tonnes and 1,025 tonnes respectively.
More pertinently, cancelled warrants - metal booked for removal - jumped 28,075 tonnes to 64,675 tonnes, the highest since May 8 last year, due to a 25,400-tonne increase at Antwerp. Cancelled warrants here now stand at 39,875 tonnes.
Aluminium at $1,954.25 was up $17.75 after stocks fell 5,900 tonnes to 5,217,425 tonnes, although cancelled warrants dropped 4,375 tonnes to 1,830,850 tonnes, their lowest since December 21.
Nickel at $16,805 was $270 lower - stocks were down 348 tonnes at 162,306 tonnes but cancelled warrants declined 690 tonnes to 29,094 tonnes.
Lead at $2,181 was $11 higher after stocks and cancelled warrants both fell 2,925 tonnes to 271,475 tonnes and 147,350 tonnes respectively.
Sister metal zinc gained $8.50 to $1,931 although inventories rose 3,175 tonnes to 1,199,725 tonnes and cancelled warrants were down 3,450 tonnes at 593,125 tonnes.
Tin was up $189 at $23,039, shrugging off another rise in stocks - this time of 65 tonnes to 14,145 tonnes, the highest level since May 22. Cancelled warrants edged 10 tonnes higher to 2,355 tonnes.
Steel was offered at $300 but not bid, with stocks unchanged for the 48th consecutive day. In the minor metals, cobalt was indicated at $25,000/25,700, with stocks stable at 429 tonnes but cancelled warrants slipping two tonnes to 43 tonnes. Molybdenum was offered at $24,000, with no change in stocks.
(Additional reporting by Gregory Holt, editing by Mark Shaw)