London 20/07/2012 - The relief rally that lifted base metals bar nickel on Thursday came to an abrupt halt on Friday morning, when sentiment soured and eurozone fears where once more in the spotlight.
Today, eurozone finance ministers are expected to approve a bailout of up 100 billion euros for Spain to recapitalise its banks. The exact size of the loan will be decided in September following a second audit of the country's beleaguered banking sector.
On Thursday, the cost of refinancing debt in Spain climbed above seven percent - a level seen as unsustainable by some - for the first time in a week. The yield of Spanish 10-year bonds was last around 6.94 percent
Adding to eurozone concerns was the German PPI, which came in below the expected -0.3 percent at -0.4 percent, the lowest figure since May 2010. There are no further data releases scheduled for today.
Investors continue to flee the euro - the single currency was last at 1.2256 against the US dollar, close to its intraday low of 1.2244. It has been turned back at 1.23 several times in recent sessions and is seen falling further as investors seek safety elsewhere.
In equities, the FTSE 100 was down 0.2 percent, France's CAC edged 0.2 percent lower and Germany's Dax was flat.
Chinese stimulus hopes are still managing to cap losses - some market participants are hopeful that the People's Bank of China will announce further rate cuts.
The market also continues to digest Federal Reserve chairman Ben Bernanke's testimony before Congress earlier this week in which he declined to make any definitive statements about whether or not the US central bank would ease monetary policy further.
“We would not be surprised to see metals continue to work higher on the back of high hopes of stimulus and China infrastructure spending but any such move is likely to turn out to be a counter-trend move,” FastMarkets analyst William Adams said.
Into the weekend, the market could see some short-covering towards the later part of today.
ALL METALS DROP
Copper at $7,677.75 per tonne was down $57.25 on Thursday's close. Total inventories rose a net 675 tonnes to 253,225 tonnes, with Vlissingen inflows totalling 1,300 tonnes and a net outflow of 675 tonnes from Busan. Cancelled warrants fell for the second day, dropping 1,400 tonnes to 52,350 tonnes.
Aluminium was last $18 lower at $1,925. Warehouse stocks rose 29,875 tonnes to 4,832,425 tonnes, with 32,725 tonnes flowing into Vlissingen. Cancelled warrants climbed 6,000 tonnes to 1,766,875 tonnes, the first increase in five trading days.
Zinc last traded at $1,857.25 down $29.75 or 1.1 percent. Stocks, which have been trending higher of late, increased again, climbing 2,700 tonnes to 1,015,075 tonnes.
The largest increase was registered at Port Klang in Malaysia at 6,875 tonnes, while Johor inventory fell 2,300 tonnes. Cancelled warrants at 172,450 tonnes were 5,675 tonnes lower.
Nickel at $16,041 was down $9. Inventories were slightly lower, falling 492 tonnes to 110,658 tonnes. Yesterday the metal had attracted attention due to increases in stocks at Vlissingen; today, however, stocks there fell 12 tonnes.
Lead at $1,910.75 lost $18.75 although stocks fell 1,350 tonnes to 338,325 tonnes and cancelled warrants jumped 7,825 tonnes to 172,450 tonnes.
Long Beach in the US was responsible for the rise - cancelled warrants in this location at 9,625 tonnes now account for more than 50 percent of all stocks there.
Tin at $18,900 was down $195, with inventories unchanged at 11,715 tonnes but cancelled warrants climbing 875 tonnes to 4,095 tonnes due to metal booked for removal from Johor.
Steel was steady at $400/420, while inventories were unchanged at 43,680 tonnes. In the minor metals, cobalt was indicated at $27,300/28,250 while molybdenum was offered at 27,350.
(Additional reporting by Eddie van der Walt, editing by Mark Shaw)