London 04/02/2013 - Base metals tracked back from their earlier highs during Monday's LME premarket, reflecting similar signs of retracement and corrections in other financial markets, with the complex due for a short-term consolidation phase, traders said.
"We believe that, on balance, the fundamentals have changed little since the end of 2012 to justify the price gains seen. Furthermore, with physical buying still slow, speculative short-covering and CTA/momentum buying has pushed prices into over-extended territory," analyst Stephen Briggs of SocGen said.
Earlier in Asia, copper led the way, climbing to a fresh four-month high, while zinc cleared keynote resistance to hit its best for a year. Nickel was also at a four-month high, aluminium and lead reached new one-month peaks and tin rose to its best since mid-January.
Given the pace of the rally, there is likely to be some profit-taking, while Wednesday's February traded option declarations could trigger some post-expiry volatility as prices have moved towards upside strikes. But the general outlook remains upbeat given improving macroeconomic prospects and rising risk appetite.
"We feel industrial prices have now moved up to higher trading ranges and may well now start to meander sideways," William Adams of FastMarkets said.
The euro, which hit a 14-month high of 1.3711 against the dollar on Friday, was more than one cent off that peak, trading about 1.3585.
The advances of the last two weeks took place against the background of economic data that has largely signalled economic prospects for 2013 are improving. Although there have been exceptions - the Chinese PMI and US GDP - most releases have been better-than-expected.
On Friday, the US January non-farm payrolls report and the UoM consumer sentiment index were both constructive. Today, US factory orders are due later. So far, January Spanish unemployment rose 132,100 against a forecast 150,000, the February eurozone Sentix Investor Confidence index was -3.9 against a predicted -2.2 and the December eurozone PPI fell 0.2 percent as expected.
Analysts said once any correction and reaction is out of the way, the run-up to the Chinese week-long New Year holidays that start next week could see further price strength.
"Chinese consumers [may] feel there is a risk that the firmer trend continues over the New Year holiday, in which case there may be some pricing this week ahead of next week’s holiday," Adams added.
COPPER SETTLES BACK FROM HIGHS ABOVE $8,300/T, ZINC OFF ONE-YEAR HIGH
Copper, which hit a fresh four-month high of $8,346 per tonne in Asia, was trading at $8,291, up just $1. Warehouse inventories fell a net 1,800 tonnes to 374,200 tonnes. Aluminium dipped to $2,132, up $14 still, from a one-month high of $2,147.25. Stocks fell 1,950 tonnes to 5,113,350 tonnes.
Zinc pulled back from its one-year high of $2,190 to trade at $2,179, up $4 still - stocks fell 3,225 tonnes to 1,202,050 tonnes. Lead pulled back to $2,466, up $15 still, from its one-month high of $2,483.25. Stocks fell for the 11th day in a row - down 50 tonnes at 290,075 tonnes.
Nickel was near a four-month high of $18,750, trading at $18,725, up $100. There was a modest one lot or six-tonne increase in stocks to 150,906 tonnes, the highest since mid-April 2010, but cancelled warrants - metal booked for removal - rose to a new all-time high of 24,444 tonnes.
Tin touched $25,200, its highest for two weeks, and then traded at $25,050, a $150 advance. Inventories were unchanged at 13,625 tonnes.
In steel, inventories were motionless at 83,070 tonnes for the 16th day in a row. In the minors, cobalt was indicated at $24,500/26,450, with a one-tonne fall in inventories to 434 tonnes. Molybdenum was neglected.
(Editing by Mark Shaw)