LME MORNING - Base metals softer in risk-off trading sessions

By: Kathleen Retourne

London 28/08/2013 - The base metal complex pared back from early session highs on Wednesday as increased political tension in Syria weighed on prices.

Still, market participants said that while a downswing looks likely, moves lower are likely to be temporary.

“In the next few days, prices are likely to remain heavily influenced by geopolitics. We would note that during previous instances of geopolitical turmoil, price effects were usually temporary with risk premia deflating again within a matter of weeks,” said Credit Suisse in a note.

“With markets still in summer holiday mode trading conditions are likely to remain thin and will serve to intensify any escalation in tensions towards Syria,” added FastMarket analyst James Moore.

“Meanwhile given the potential for intervention we could see a deeper downside swing to risk sentiment with traders unlikely to add any sizeable fresh exposure ahead of the host of manufacturing PMI readings due next week.”

Data releases from Europe this morning were mixed, GfK German consumer climate disappointed at 6.9 against an expected 7.1, while German import prices were as expected, rising 0.3 percent. M3 money supply beat expectations at 2.2 percent, but Italian retail sales at -0.2 percent disappointed, while private loans also undershot at -1.9 percent.

Later today US pending home sales are due, forecast at 0.2 percent. The numbers are seen as highly sensitive as a report last week showed new home sales falling to the lowest since January this year.

Copper at $7,273 per tonne was down $43 on the previous day’s close, while inventories dropped 1,525 tonnes to 574,825 tonnes. Cancelled warrants at 282,550 tonnes were down 8,225 tonnes.

Aluminium was down $3 at $1,884, although stocks fell 9,175 tonnes to 5,412,975 tonnes and cancelled warrants fell 10,325 tonnes to 2,017,000 tonnes.

Nickel business at $14,350 was marginally higher, up $25, despite a stock rise of 426 tonnes to 212,328 tonnes – a fresh all-time high.

Zinc at $1,975 was down $8, with both stocks and cancelled warrants down 10,025 tonnes to 1,014,825 tonnes and 609,150 tonnes respectively. Sister metal lead at $2,221 was $3 lower with a 575 tonnes reduction in stocks to 185,950 tonnes.

Tin at $21,581 declined $244, although stocks fell 55 tonnes to 15,240 tonnes and cancelled warrants rose 675 tonnes to 4,290  tonnes.

Steel was indicated at $100/200 with no change in stocks. In minor metals cobalt was neglected but stocks saw a four-tonne increase to 526 tonnes. Molybdenum was neglected.

(Editing by Martin Hayes)