LME MORNING - Metals mostly higher, positive ahead of key ECB meeting

By: Martin Hayes

London 06/09/2012 - Base metals largely traded at firmer levels during the Thursday LME premarket session while the countdown to a key ECB meeting today, where the fate of the euro is in focus, continued.

Strength in other financial markets buttressed sentiment, traders said - aluminium and zinc both swept to new two-month highs, lead reached a fresh high since mid-May and copper was hovering close to Wednesday's six-week peaks.

European equities and the euro were higher, as were precious metals, with gold at a six-month peak above $1,700 per ounce. The euro was around 1.2615 against the dollar, not far off two-month highs.

Additionally, the metals complex has been boosted this week by fresh-month investment buying and technical covering, with tightness also a factor in some markets.

"With good momentum and CTAs still covering shorts, we would expect to see further counter-intuitive price rises - the almost voracious appetite at times for buying does smack of the much-discussed addictive nature of those banking on QE," a trader said.

Trends in all financial markets will hinge on developments early this afternoon, given expectations that the European Central Bank and its governor, Mario Draghi, will announce a short-term bond buying programme from troubled member states. This is aimed to tackle the eurozone sovereign debt crisis.

"Over to Draghi now to convince investors he has a credible plan to do 'whatever it takes'- sentiment can turn on a sixpence if he fails to deliver," the trader said.

As well, during what may turn out to be a lively afternoon, there is a string of US data releases, which include the August ADP employment change - a possible early indicator of tomorrow's jobs report - as well as the August Challenger Job Cuts and ISM Non-Farm Manufacturing PMI and weekly unemployment claims.

The week will round off with key US August non-farm payrolls data on Friday. The data will illuminate the chances of more QE in the country, especially after Federal Reserve chairman Ben Bernanke commented last week on the grave conditions of the US labour market.

Soft US manufacturing data and construction spending on Tuesday also raised expectations of further stimulus measures, which some hope could be announced at the Fed's meeting next week.


Copper traded as high as $7,749 per tonne, just $1 below Wednesday's six-week peak, and then settled at $7,726, a $14 loss from the previous close.

Warehouse stocks fell for the ninth day in a row - down a net 1,825 tonnes to 213,225 tonnes, the lowest since October 2008. Outflows of 2,475 tonnes in Gwangyang offset inflows in Rotterdam and Busan - with cancelled warrants falling 900 tonnes to 29,550 tonnes.

Aluminium hit $1,987.50, the highest since July 3, before settling at $1,980, up $8. Stocks dipped 8,225 tonnes to 4,866,400 tonnes. Rotterdam saw an inflow of 3,000 tonnes but Detroit and Vlissingen had similarly sized outflows. Cancelled warrants were down 9,725 tonnes to 1,667,425 tonnes.

Lead peaked at $2,048, the strongest since May 15 and a $20 gain, although a 19-day run of inventories came to an end - stocks rose 275 tonnes to 304,750 tonnes. Tightness is evident for prompt dates in the run-up to the September 'third Wednesday'.

In other metals, zinc broke above $1,900 to trade as high as $1,912, the best since July 3, and then settled at $1,904, up $13. Stocks fell 2,800 tonnes to 945,250 tonnes after New Orleans inventories dropped 1,300 tonnes and Port Klang, Malaysia, saw an outflow of 1,500 tonnes. Cancelled warrants were down 2,900 tonnes at 142,975 tonnes.

Nickel was $170 higher at $16,270 but stocks jumped a hefty 1,098 tonnes to 121,152 tonnes, the highest since April 2011. Tin was $85 lower at $19,615 - stocks were unchanged at 11,660 tonnes.

Steel billet was neglected, with stocks static. Cobalt held steady at $29,000/30,000. Molybdenum was also neglected but stocks fell 30 tonnes to 186 tonnes, the lowest since July 2010.

(Additional reporting by Eddie van der Walt, editing by Mark Shaw)