LME MORNING - Metals consolidate run-up, mood perks up ahead of US jobs data

By: Martin Hayes

London 02/12/2011 - Base metals stepped back from their highs during Friday LME premarket trading but most held comfortably in the plus column, underpinned by firm equity markets and a better tone in the financial sector ahead of today's key US non-farm payrolls report.

The euro was also steady at 1.3470 steady the dollar. Still, the metals’ price rises so far largely represent upside consolidation after Wednesday's spurt higher - the mood remains vulnerable to developments in the eurozone. 

"We saw on Wednesday the rush to jump on the bandwagon when positive developments unfold but in the current financial environment we would not be surprised to see more traders stay on the sidelines," William Adams of FastMarkets said.

Sideways trading may now prevail until early afternoon and the US dataflow. The non-farm payrolls data is widely expected to show a pick-up of 126,000 in November, beating October's increase of 80,000.

Earlier this week, the ADP employment report showed a better-than-expected increase in jobs, which raised hopes that today's numbers could even surprise on the upside.

This would counterbalance weak sentiment elsewhere - manufacturing growth last month came in below forecast in the eurozone and China, data showed. Spanish unemployment rose nearly 60,000 in November from the previous month, figures released earlier today showed.

Earlier this week, commodities and equities rallied after major central banks agreed to lower pricing on the existing temporary dollar liquidity swap arrangements by 50 basis points. This allows banks to access US dollars - the preferred currency of trade - at cheaper levels to finance foreign trade.

But traders were cautiously waiting for the immediate market euphoria to fade, believing the measures are insufficient in themselves to resolve wide credit issues.

"The technical indicators are generally positive so there may well be more room on the upside in the near term but we would expect any further strength to be seen as providing better selling opportunities," Adams added.


COPPER PROBES ABOVE $7,900 BUT INVENTORIES RISE

Copper hopped above  $7,900 to touch $7,955 before settling at $7,905 per tonne, up $115 from the Thursday close. Warehouse stocks rose, however, for the second day in a row - up a net 1,450 tonnes to 388,150 tonnes.

On the supply side, although workers at Freeport-McMoRan Copper and Gold’s Cerro Verde mine in Peru ended a strike earlier this week, pressures remain - another strike continues to hamper output at Freeport’s larger Grasberg copper mine in Indonesia’s Papua province.

Aluminium business at $2,145 was unchanged - prices consolidated below the two-week high of $2,158 hit yesterday when they rose on strong technical buying. Stocks fell 2,675 tonnes to 4,554,975 tonnes.

Lead was $19 higher at $2,116. Stocks dropped 2,425 tonnes to 366,825 tonnes, the lowest for two-and-a-half months, while cancelled warrants jumped 33 percent to 45,775 tonnes due to further cancellations in Singapore. In two days, cancelled warrants have climbed 54 percent, with nearly 19,000 tonnes booked for removal from Singapore.

Zinc traded at $2,053, up $8 after stocks fell 4,100 tonnes to 737,250 tonnes, the lowest since mid-April. Nickel business at $17,130 was up $345. Inventories, which had risen for eight days in a row, dropped 252 tonnes to 90,822 tonnes.

Tin was the exception, falling to a two-month low of $19,900, a $200 loss, with the market reacting to expectations of shipments resuming from Indonesia. 

Steel billet traded at $540, up $10. Stocks held at 68,445 tonnes, equalling yesterday's 14-month high. Meanwhile, the minor metals were neglected.


(Additional reporting by Clara Denina. Editing by Mark Shaw)

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